Home sales in southeastern Wisconsin have been steady all year, but inventory has remained tight, with people feeling too comfortable to sell and still not seeing home values back to the peak of 2006.
By the end of 2016, however, inventory will loosen and at some point next year, home values should finally return to where they were before the Great Recession, said Mike Ruzicka, president of the Greater Milwaukee Association of Realtors.
In fact, for the first time this year, inventory began to loosen slightly in June, increasing 3 percent from June 2015 in the four-county region of Washington, Ozaukee, Waukesha and Milwaukee counties, according to GMAR.
Ozaukee County saw the largest increase in inventory, up 20 percent from 174 listings in June 2015 to 209 listings in June 2016. Milwaukee County was up 3 percent year-over-year, from 1,606 homes for sale in June 2015 to 1,654 homes for sale last month. This trend is likely to continue through the end of the year, although people are still cautious about selling their homes, Ruzicka said.
“If you’ve lived through the recession and now you’ve refinanced and are in your house for cheap, you probably figure you might as well wait it out until you can sell at a price point you are comfortable with,” Ruzicka said. “It has bottlenecked the market, so even though home prices are up, people are not ready to downsize into a condo or upsize just yet.”
Milwaukee County was hit the hardest in the Great Recession and home prices there are still 14.7 percent below what they were when prices peaked in 2006. Comparatively, Washington County is 3 percent below its peak, Ozaukee County is 3.7 percent below and Waukesha County is 5.9 percent below peak values.
Still, Ruzicka is optimistic, based on what he has been seeing in Milwaukee County and the City of Milwaukee.
The city did very well in the second quarter, with sales up 11 percent over the second quarter of 2015 and the average home sale price up 5 percent year-over-year. The number of days a house in the city stayed on the market was also down. All three factors are good indicators that the Milwaukee home market is hot, Ruzicka said.
“I think we will see some good price appreciation by the end of the year and into next year,” he said. “I imagine by one of the quarters next year we will be above the pre-Recession point, which will be a boost to the psyche as well.”
Homes priced at less than $350,000 are “flying off the shelves,” Ruzicka said, selling within a week provided there is not a major problem with the home.
While all of the lending options that existed prior to the recession, including putting 0 to 3 percent down, still exist, lending standards have changed. Lenders are stricter about who can qualify for loans.
“Lenders learned a valuable lesson – the recession wasn’t caused by cheap money, it was giving cheap money to the wrong people,” Ruzicka said. “You could make the argument that the banks are being too restrictive, but we don’t have enough houses (on the market) so that is a discussion for a later debate.”