Over the past two years, the Milwaukee county real estate / housing market for single-family homes has seen some challenges, but is there an end in sight? It’s a difficult question to answer at this point, but let’s look at where the housing market has been and where it may be going.
Limiting our analysis to single-family homes listed at $150,000 and up, the Milwaukee Metropolitan Multiple Listing Service (MLS) had 2,408 listings in 2006. In June 2008, the same MLS data showed 2601 listings – an increase of 8%. Looking at sold units from June 2006 MLS data, Milwaukee county real estate had 6.3 months of inventory as compared to 9.2 months of inventory in June 2008 – a 46% increase. Does it mean that the entire housing market is depressed? Not necessarily. The listings in Milwaukee continue to decline, although the sales numbers fall at a faster pace which causes the months of inventory to increase. The story is similar for many housing markets in southeastern Wisconsin.
It is difficult, if not impossible, to understand a real estate market without taking the different components of the housing market into consideration. All too often the national and local media do the real estate market an injustice by using aggregate numbers without fully understanding what they mean. Price segmentation is the key to understanding any real estate market.
Let’s take a closer look at the different price ranges of Milwaukee county real estate:
LISTINGS
June 06 June 07 June 08 % Change 06-08
$150-$175 657 816 736 +12%
$175-$200 450 594 505 +12%
$200-$225 204 289 272 +33%
$225-$250 216 325 256 +18%
$250-$275 155 176 158 +2%
$275-$300 162 158 152 -6%
$300-$325 98 95 67 -31%
$325-$350 84 111 93 +10%
$350+ 382 349 362 -5%
Total 2408 2913 2601 +8%
SOLD
June 06 June 07 June 08 % Change 06-08
$150-$175 1598 1377 1014 -36%
$175-$200 923 877 671 -27%
$200-$225 477 522 429 -10%
$225-$250 429 449 358 -16%
$250-$275 285 316 235 -17%
$275-$300 226 243 147 -35%
$300-$325 116 150 128 +10%
$325-$350 124 127 107 -14%
$350 and Over 386 417 311 -19%
Total 4564 4478 3400 -25%
MONTHS OF INVENTORY
June 06 June 07 June 08
$150-$175 4.9 7.1 8.7
$175-$200 5.9 8.1 9.0
$200-$225 5.1 6.6 7.6
$225-$250 6.0 8.7 8.6
$250-$275 6.5 6.7 8.1
$275-$300 8.6 7.8 12.4
$300-$325 10.1 7.6 6.3
$325-$350 8.1 10.5 10.4
$350 and Over 11.9 10.0 14.0
Total 6.3 7.8 9.2
Source: Milwaukee Metropolitan MLS statics
So what does this tell us? On one hand, the market clearly has some room for recovery and there are some specific price ranges, such as the $350 and over, that undoubtedly have problems. But looking a little harder at the MLS data, one might find some opportunities within the market as well. For example, the $225K-$250K and the $300K – $325K price segments are showing some signs of stabilization. In fact, in the $300-$325 range, market listings are down 31% but the sales numbers are up 10% – this is a trend we look for in all markets.
Another important question to ask when considering the overall health of the Milwaukee county real estate market is: What is happening in the vacant lot market? Specifically, is the housing market adding more land than needed or is it pulling back on supply?
Let’s look at the residential lot approvals for the last seven years:
|
Milwaukee County Plats |
||
|
|
Lots |
Plats |
|
2000 |
246 |
13 |
|
2001 |
225 |
5 |
|
2002 |
252 |
10 |
|
2003 |
519 |
14 |
|
2004 |
408 |
11 |
|
2005 |
436 |
21 |
|
2006 |
195 |
11 |
|
2007 |
188 |
11 |
Source: State of Wisconsin Department of Administration
The chart above shows the number of plats along with the corresponding number of lots approved in Milwaukee county in each respective year. This information is very important – especially to a banker looking to make a loan for a new housing development. You will notice that 2003 was the peak for lot approvals, which created strong supply in 2004 and 2005. The good news is that for the last two years we have seen less than half the number of lots approved than in any year from 2003 to 2007. In fact, 2006 and 2007 were the slowest years for lot approvals since the 1990s. All this bodes well for Milwaukee county real estate and the housing market.
Before making a loan to a real estate developer or home builder, be sure to 1) analyze the market, 2) research MLS data, and 3) understand the historical context of the numbers.
Make sure to check back next month for an analysis of the Waukesha county market.
For more information on the Milwaukee county real estate market or other south eastern Wisconsin markets, contact Scott B. Thistle at Provident Real Estate Service sthistle@providentres.com or visit our website at www.providentres.com
Mr. Thistle is a Managing Member of Provident Real Estate Services LLC and President of Brookstone Homes, Inc . He has seventeen years experience in real estate development. Provident Real Estate Services, LLC is a real estate consulting group specializing in bank workouts and real estate disposition.
