Aided by the federal home buyer tax credit, which expired at the end of April, southeastern Wisconsin’s housing market showed some signs of improvement in the first half of the year.
However, it will probably take years for the market to return to its 2007 peak, and it remains to be seen how the market will perform in the second half of the year without the tax credit.
Home sales in the four-county (Milwaukee, Waukesha, Ozaukee and Washington) metro Milwaukee area were up 14.4 percent during the first half of 2010, compared with the first half of 2009, according to the Greater Milwaukee Association of Realtors (GMAR).
Sales in the metro area declined 2 percent in June, compared to June of 2009, a reflection that the expiration of the tax credit has slowed sales.
First-time home buyers received an $8,000 tax credit and repeat home buyers received a $6,500 tax credit for home purchases if a binding sales contract was signed by April 30.
Another major sign of good news for the region’s housing market: the average sale price of a home sold in the 8-county southeastern Wisconsin area increased to $181,824 during the first half of 2010, compared to $171,927 in all of 2009, according to MLS data provided by GMAR.
Milwaukee County led the region in home sale price growth, with an average sale price of $145,908 in the first half of 2010, up 12.7 percent compared to the first half of 2009.
However, the region’s average home sale price is still well below the 2007 peak of $227,165. Still, the uptick in the first half of the year could be an indicator that the area’s housing market has bottomed.
“I think we’ve hit bottom,” said John Horning, executive vice president of Brookfield-based Shorewest Realtors. “I think things have stabilized.”
Milwaukee area residential Realtors say the second and third tiers of the housing market, priced between $250,000 and $500,000 are the best performing segments right now.
The June data demonstrates that trend. Sales in Milwaukee County, which mostly has lower priced homes, were down 4.7 percent in June. Areas with more $250,000 to $500,000 homes performed better in June. Sales in Waukesha County were up 5.0 percent in June and sales in Ozaukee County were up 10 percent in June.
However, the strength of the second and third tier markets skews the data and provides a false impression that home values in the area are increasing. For the most part they still are not, said Ted Dentice, vice president and general sales manager for Shorewest Realtors.
Values of homes are not rising yet because, “there is still a tremendous amount of inventory in the market,” Dentice said.
The value of homes in the Milwaukee area will plateau for a while, Horning said. High unemployment plus a high number of short sales and bank-owned homes for sale are all major factors that will stagnate area housing values for awhile, he said.
The starter home market has cooled considerably since the tax credit expired in April, and the high-end market remains slow.
“July is typically a very busy and active market (for high end lake homes),” said Kristin Prange, owner of Premiere Properties Ltd., which specializes in the Waukesha County Lake Country area. “It’s still very quiet. I still think the upper tier is slow.”
Realtors say most sellers have become more realistic and have realized that housing values are not going to rise significantly anytime soon.
“You have to price appropriately for the market,” Dentice said.
Buyers, on the other hand, are taking their time, Realtors say. Most buyers have little sense of urgency because they know that it is still a buyer’s market and they have plenty of homes to choose from and little competition. That is a major shift from three years ago when the market was at its peak and buyers had to bid aggressively for a home they wanted to buy.
When the housing market collapsed and the economy sank into the Great Recession the number of homes for sale dropped dramatically as many homeowners decided to wait for the market to improve before selling. Realtors say some of those homeowners have gotten tired of waiting and the number of homes for sale has increase lately, even though prices have shown little improvement.
“I think people are just tired of all of the negativity and they just want to move forward,” said Kathy Domagalski of Coldwell Banker Residential Brokerage. “People have accepted the reality that (the market) is not going to change.”
Another sign that the housing market is improving in southeastern Wisconsin is that more homes began construction during the first half of the year, compared to the first half of 2009, although housing starts are still much lower than the 2004 peak.
For the first half of the year there were 479 single family and duplex housing starts in the metro Milwaukee area, up from 380 in the first half of 2009 but way below the 1,552 housing starts from the first half of 2004.
In Racine and Kenosha counties there were 137 housing starts in the first half of 2010, up from 119 in the first half of 2009, but well behind the peak of 780 during the first half of 2004.
The tax credit also provided a boost to home construction.
“We’ve definitely noticed the tax credit had an impact,” said Richard Hodges, executive director of the Metropolitan Builders Association.
One developer is planning a major housing development in Walworth County. Geneva, Ill.-based Sho-Deen Inc. wants to build 623 homes, priced between $180,000 and $300,000, on 221 acres southeast of County Highway F and Mound Road, in the Town of Delavan.
Residential real estate professionals expect the region’s housing market to show gradual improvement in the second half of the year. Although the economic recovery remains weak, Realtors are hopeful that buyers will take advantage of low interest rates (at about 4.5 percent at press time), low prices and attractive inventory.
“I think we are slowly coming out of it and into recovery,” said Tammy Maddente, executive vice president of First Weber Group. “There has never been a better time to buy. People are resilient. At some point they will say, ‘Screw it, I’m moving forward with my life.’ I think we will see recovery in the second half.”
“I’m looking forward to things picking up in the second half of the year,” said Bob Larson, general manager of First Weber Group.
Buyers can also take advantage of competition between homebuilders that are eager for work, Hodges said.
“There will never be a better time to build,” he said.
