Milwaukee-area residential real-estate experts say the housing affordability issue in the region (and state) comes from a number of factors such as lack of inventory, rising interest rates and burdensome regulations, among others.
A group of industry officials spoke about troubles in the current residential market and detailed ways this is being addressed as part of a panel discussion Monday morning at the annual Wisconsin Residential Real Estate Summit. The event, put on by Marquette University’s Center for Real Estate, took place at the Wisconsin Club’s City Club in downtown Milwaukee.
The event comes during a time when the Milwaukee area has observed a general downward trend of home sales. Earlier this month, the Greater Milwaukee Association of Realtors reported home sales were down 3.5 percent in January compared to the same month the year prior. That marked the seventh month out of the last nine with lower year-over-year sales in the metro area.
GMAR noted that brokers attribute the lower sales to a lack of available inventory. Monday’s panelists acknowledged the meager supply of homes, especially those priced at $300,000 or less, is a primary culprit of affordability.
Vickie Kelsall, regional manager with Century 21, said the tight inventory coupled with high demand puts a damper on the morale of both the prospective home buyers and real-estate agents. This has increased the likelihood of buyers dropping out of the market entirely.
“The last couple years have been very difficult for buyers’ agents as well as their buyers with the lack of inventory and multiple-offer situations,” Kelsall said. “(They’re) putting in multiple offers and losing out several times in a row.”
The issue goes beyond the first-time buyer and even impacts someone who may be looking to upgrade to a larger home, she later added.
“A lot of the reason we have this inventory issue is because we have people that, they want to be a move-up buyer, but there’s nothing for them to move up to, so they’re afraid to put their house on the market because they’re going to end up with their house getting an offer yet they can’t find anything that to move into, or the opposite way,” said Kelsall.
Doug Gordon, president and chief executive officer of WaterStone Bank, said rising interest rates play a role. He noted that for those who bought a home three to five years ago but may be thinking of upgrading and taking on a new mortgage are looking at a payment that will be as much as 20 percent higher than their current one.
“So, that’s a deterrent to get rid of your first-time (home) and create that inventory,” he said.
The solution isn’t as simple as building more homes, either, said David Belman, president of Waukesha-based homebuilder Belman Homes. Belman shared with the audience a lengthy list of issues that make building new even more expensive than hunting for an existing home, even with the lack of availability.
“(Some think the solution) always is, ‘Hey, builder, build more houses. We need more houses.’ And I’d love to do that but the problem is I can’t build them for the price that you guys want,” said Belman.
He said the biggest issue with homebuilders is the lack of skilled labor. A lot of construction workers were without work during the Great Recession and many have not returned after the industry recovered.
Another major issue, said Belman, is government action such as tariffs and regulation. The 20-percent tariff on Canadian lumber in effect increased by 60 percent the price of lumber his company was buying last year. Making matters worse are tariffs on foreign-produced steel as well as tariffs on goods imported from China. This means that Chinese-made appliances, countertops, flooring and hardware have become more expensive.
“All of a sudden, the cost of that (new) home keeps shooting up,” Belman said.
Belman added that federal, state and local regulations add thousands onto the cost to construct new homes. He cited a 2015 statistic from the National Association of Home Builders that contends government regulations add $84,671 to the price tag of a new home, on average.
To address the ongoing affordability issue, Kelsall said realtors and buyers have started to get creative, such as multiple generations or even multiple families coming together to buy a home. She added that the industry needs to continue advocating against high property taxes and restrictive land-use regulations.
Belman said housing developments that are denser with homes being built closer together could also help address the cost of building new. However, both builders and local officials need to be willing to make that change, rather than build on 1-acre lots.
“We need to build these homes closer together, we need smaller homes, and we need the flexibility in our community to do that,” he said.