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For years, the Josey Heights and Walnut Circle single family home developments on Milwaukee’s near northwest side sat mostly vacant, even as sprawling new subdivisions have been developed on the periphery of the metro area, mostly offering homes priced $400,000 or more.
That began to change a few weeks ago after crews started constructing new homes in Josey Heights and Walnut Circle. This achievement will lead to additional investment and homeownership in the surrounding community, said a builder involved in the effort to kick-start the subdivisions.
“That’s the goal, is to generate momentum,” said Michael Emem, president of Milwaukee-based Emem Group LLC. “(This will) generate more interest and activity into these subdivisions, and not just these subdivisions but the neighborhoods around them.”
Recently, sales of four lots have closed in Josey Heights, located at North 12th and West Lloyd streets, and Walnut Circle, located at North 20th and West Walnut streets, according to Yves LaPierre, real estate project manager with the Milwaukee Department of City Development. LaPierre added the city has accepted offers on several more lots in the subdivisions.
Only a few homes have been built in the subdivisions, which were created in the mid-2000s by the city. Until recently, they remained largely unchanged following the housing market crash of 2007 and Great Recession, even in recent years when new-home construction boomed in the metro area.
The lack of activity in Josey Heights and Walnut Circle wasn’t an unwillingness from prospective buyers. Rather, it took a hike in city incentives to close a financial gap between what banks would lend and what it cost to build, said Emem, whose firm is designing and building the houses.
“I had seen in the market through my design-build work, working mostly with house flippers in Milwaukee as their designer, what was happening in the home sales market,” Emem said. “Home values throughout the city, throughout the region, had been steadily increasing in the past few years ever since the recession.”
Emem said he saw through his work and some analysis that the city could cover the financial gap for prospective home buyers if they offered the right level of incentives.
The timing was right to push for new homes in Josey Heights and Walnut Way because appraised values in rehabbed homes were coming back higher than any type of product since around 2007, Emem said. He specifically remembers working on a flipped home in Sherman Park that came back appraised around $200,000.
It was then the city ordered an appraisal for a new home in Walnut Circle, based on Emem’s building plans. The appraisal came back around $215,000.
“Taking all that into consideration, we figured at $215,000 (appraised value) I could build a house at $250,000, that was a very attainable gap to close,” he said.
The city had been offering lots for $1 and a forgivable second mortgage of $10,000. Through contributions from Associated Bank and the Zilber Family Foundation, the city increased the second mortgage offer to $30,000.
Incentives are being offered to the first 10 homebuyers in Josey Heights and Walnut Circle, LaPierre said.
Milwaukee resident Heidi Moore was the first to take advantage of the new city incentives and closed on her new home in Josey Heights in the fall. At the late-December groundbreaking ceremony, Moore said she and her family had for years wanted to build a new home there.
“I had gotten preapproved by three different banks … but unfortunately the appraisal did not equal how much it would cost,” she said. “And so the deal stopped.”
Emem and the city found the right amount to get the ball rolling again in Walnut Way and Josey Heights, but it shouldn’t be that difficult to build a new home in these neighborhoods, he said.
“The appraisal issue was and has been the largest impediment to new market-rate home construction in the inner city,” he said.
But the city is taking on that challenge with the development of Josey Heights and Walnut Circle. Emem said the new homes will increase the overall market value in those neighborhoods, and make it easier for future homebuyers and builders.