A local realtors group says the Milwaukee area is building too many apartments and lacks enough new single-family homes, while other experts contend more residences of all types are needed in the area, including ânon-traditionalâ forms of housing.
The metro Milwaukee housing market has fallen back to Earth after a historic 2021, when a record 23,800 units were sold in Milwaukee, Ozaukee, Washington and Ozaukee counties, according to the Greater Milwaukee Association of Realtors. However, sales through the third quarter are off just 8.6% year-over-year, and the market is still performing well compared to recent years prior to the pandemic, which sent demand into overdrive.
âThe only reason we canât repeat (2021) is we donât have enough listings (of homes for sale),â said Mike Ruzicka, president of GMAR.Â
In a recent housing market update, Ruzickaâs group contended that an overbuilding of apartments and lack of single-family home and condominium construction is a âsystemic problemâ for the Milwaukee area.
If the region does not build more single-family homes, âthousands of would-be homeowners will be forced into rental units, foregoing the opportunity to build wealth through a homeâs equity and all of the other benefits of homeownership,â GMAR argued in its market update.
But the regionâs apartment construction also lags renter demand, said Gard Pecor, senior market analyst at Washington D.C.-based real estate data company CoStar Group.
At 3.3%, Milwaukee has one of the lowest apartment vacancy rates in the country and the lowest rate among a dozen Midwestern peer cities, according to CoStar Group data. Meanwhile, the Milwaukee market is building new apartment units at a rate that equals 4% of its overall existing inventory, putting it in the middle of the pack among its peers.
âThereâs quite a bit more room for construction growth in the Milwaukee market, especially when youâre looking at what some of our peers are doing,â Pecor said.
Itâs also true that the lack of single-family home listings has created âa new type of renterâ in the Milwaukee market, Pecor said. This group consists of dual-income households, younger married couples and higher earners, who all typically lean toward buying homes.
âThatâs really led to a push toward demand for some of the higher-end and luxury inventory being developed in the multi-family side,â Pecor said.
Each housing type has its own challenges.
Homebuyers are not struggling as much to secure a home as last year, but they still encounter some headaches, said Courtney Stefaniak, a real estate agent with The Stefaniak Group.
âThe challenges buyers are facing right now âĤ are the lack of supply, and then the increasing mortgage rates,â she said.
No longer are buyers competing with a dozen or more offers on a single home, and they donât need to waive contingencies to make their offers more competitive. But rising home prices means buyers may have difficulty finding something they can afford. Rising interest rates have not taken many homebuyers out of the market, Stefaniak said. Rather, they have to scale back the price range of the homes theyâre looking at.
New-home construction in the metro area has recovered a bit since the low during the Great Recession of 2008, according to building permit records compiled by the Wisconsin Builders Association. But itâs still a far way off from the pre-recession highs that reached back into the 1990s.
There is not much land available for new subdivisions in many communities. Where there is land, lots are expensive to buy and develop, said Ruzicka. A labor shortage has long plagued the building industry, and construction materials are increasingly expensive.
Renters face consequences when thereâs a lack of new apartment development. For example, the city of Wauwatosaâs slow growth of apartment supply relative to demand has led to some of the highest growth in rental rates throughout the metro area, Pecor said. Communities like Franklin and Oak Creek, which tend to be receptive to residential projects, still see strong lease rates, he said.
The market in Oak Creek favors multi-family developments â or what the cityâs director of community development Doug Seymour called non-traditional residential projects â including attached single-family residences, duplexes or buildings with just a handful of units.
Part of the reason is the lack of large parcels suitable for new subdivisions, said Seymour. City leaders have also helped usher in projects such as the dense, mixed-use Drexel Town Square. Oak Creekâs latest ambitious development, F Street Developmentâs Lakeshore Commons, consists of hundreds of new units along the lakefront, including single-family homes, townhouses and apartments.
A variety of housing types offers a wider range of affordability while also addressing the needs of residents, both today and into the future, Seymour said.
âWe still realize thereâs a lot of work to be done to make sure that there are options that are more affordable, but we didnât want it to be a situation where you were either in a subdivision or youâre in an apartment,â said Seymour. âThatâs not what everybody wants or needs, and we want to be responsive to the population thatâs transitioning into Oak Creek."
