Home sales in the four-county metro Milwaukee area were down 19.4% in July, year-over-year, and home sales in the seven-county southeastern Wisconsin area were down 19.2%, according to the latest report from the
Greater Milwaukee Association of Realtors.
GMAR says the reason for the sales slowdown is a lack of supply of homes for sale. Listings were down 18.4% in July in the four-county metro area.
“Sales are not down due to a lack of buyer interest,” GMAR said in its report. “On the contrary, buyer demand is strong. The problem with the market is that there is simply not enough supply to satisfy byer demand. With little to no new construction of single-family homes or condominiums, and an overabundance of apartment construction, current homeowners cannot move because there simply is nowhere to move to.”
Increased interest rates have created a disincentive for homeowners to sell their existing home because if they need a loan to buyer another home they would face higher borrowing costs, GMAR says.
“Many current homeowners have mortgage interest rates in the 3% range, which may be a financial disincentive to sell if they have to take out another mortgage for a new property,” GMAR says in its report. “This scenario has created a frustrating cycle. Empty-nesters ad elderly homeowners who would like to downsize to a smaller property – opening up move-up properties – are stuck because they cannot find one. Young families who need more space and would buy those move-up properties are trapped in their small homes and apartments. And first-time buyers have to spend another year renting, and not building equity, because young families that are stuck in their first house can’t escape.”
This has led to rising home sale prices in the area, according to GMAR. Average home sale prices in the metro Milwaukee area were up 6.9% in July, year-over-year, to $400,511, up from $374,579 a year ago.
Current market conditions heavily favor sellers, GMAR says. To achieve a balanced market, the four-county area needed 4,900 additional units in July, according to its report.
“They systemic problem with the market is the lack of new construction of single-family houses and condominiums, and over reliance on apartments to satisfy demand,” the GMAR report states. “That bottleneck combined with the demographic surge of Millennial and GenZ buyers and reasonable interest rates have all contributed to a historically tight market. The imminent danger for the region if it does not create additional supply in the form of more single-family and condominium units, is that thousands of would-be homeowners will be forced to continue to rent, foregoing the opportunity to build wealth through a home’s equity and all of the other benefits of homeownership. Rather they have been, and will continue, to pay thousands of dollars a year in rent with no ability to save for a down payment – pushing off their opportunity to achieve the American dream even further.”
