Pent-up demand, continued low-interest rates, and a slowly improving economy should keep the Wisconsin residential real estate market on its positive trajectory through 2013.
That’s the assessment of Mike Theo, president and CEO of the Wisconsin REALTORS Association.
“We saw a real turnaround in 2012 and that should continue this year,” he said.
On the industrial side of the real estate industry, there is also positive news, said Jim Villa, head of the Commercial Association of REALTORS. However, the office market remains “relatively stagnant,” he added.
Villa said the final three months of last year was the 11th quarter in a row of gains for industrial space.
“We’ve been on a ‘march’ since early 2012, with spec construction up and a lack of supply,” he said. “If a company wants a building with cranes and bays, there isn’t much left.”
On the residential side, Theo said January sales were up and average of 18 percent over the same month in 2012, led by the north and central regions, which showed gains of 28 percent and 32 percent respectively. The northeast was the weakest, with a gain of 9.2 percent.
“But that’s pretty strong across the board,” he said.
Theo noted that January is normally a slow month for real estate in Wisconsin because of the cold weather, with only about 5 percent of sales occurring then.
“But the key is that it was the 19th straight month that we saw double digit increases in sales in state,” he said. “Equally important, median prices are stable here.
“For the whole of 2012, prices appreciated a little over 1 percent. In January, they were up 3.4 percent to a statewide median of $123,000, and that shows a growing housing market.”
Though the cost of buying a home was up last month, he said housing in Wisconsin remains relatively affordable.
Theo also said he believes the “glut” in the housing supply has worked its way out.
“That’s one of the major dynamics,” he said. “Last year in January, we had 12 months of inventory on the market. We’re now down to around 8.5 months. Most economists say six months or so is a balanced market, so we’re headed in the right direction.”
In hard numbers, he said that inventory figure translate into 6,000 less units on the market this January compared to the same month last year.
That means price stability and even some upward pressure on prices, he added. Foreclosures have also leveled, he said.
Theo said all sectors of real estate benefit from macro-economic trends and interest rates that are at historic lows.
“For residential, 30-year fixed rates are in the 3.5 percent range,” he said. “We think it will stay in the 3.5 to 4 percent range through all of 2013.”
He said the $123,000 median price for a home in January was still down compared to the bubble year of 2007, when the median price for that month was $156,000,” he said.
“We’re bouncing back, but by modest amounts,” he said. “From 2005 to 2007, we had artificially inflated prices that weren’t sustainable. Prices fell a lot during the crash. But they are now coming up to more historic, sustainable levels as far as prices and sales go.”
Still, Theo said, Wisconsin’s prices did not rise or drop as far as other parts of the country, where the real estate market was especially overheated.
“We didn’t have hyper-inflation like the states of California, Florida, Arizona and Nevada did,” he said.
“That’s because people here bought homes to live in, while in other places it was investors flipping properties. They overbuilt and there was a huge glut of inventory.
“We didn’t get as high as they did and we didn’t fall as far. Our band of highs and lows was much narrower. So our market never took it in the shorts like those other ones.”
Theo said the number of people selling real estate in Wisconsin has dropped significantly from the boom.
“Membership in the WRA dropped from more than 19,000 at the peak of bubble down to 13,000 this year,” he said. “There really was a hump because between 12,000 and 13,000 is traditionally what we’ve had in the state for the nearly 30 years that I’ve been with the association.”
Though membership has now reached what he called an “equilibrium for people to make a living to stay in the business,” he said the fall to 13,000 meant his association took a big hit in terms of revenues.
Theo said he believes health of the real estate market bodes well for the rest of the economy.
“Housing usually leads the economy into a recession and out of a recession,” he said. “If that’s the case, a stronger overall economy will follow.”
Theo said he’d like to see unemployment rates decrease in the sate.
“Our seasonably adjusted rate was about 6.5 percent for the past two months of 2012,” he said.
“That compares to about 8 percent on the national level. We are doing better than the rest of the country, but we haven’t had robust job growth here, which we’d like to see because that would increase demand for housing.”
Ultimately, he said, Wisconsin’s economic health is tied to the rest of the nation.
“That’s important because consumer confidence has such a big part to do with our business. Buying a house is a big, big purchase. If you aren’t confident about your job security or the economy, you’re not buying a home.
“So we have to be very cognizant of the national and state economic news to factor in how the housing market is going to go. But you can’t argue with 19 straight months in increases in sales.”
— By Brian E. Clark
For WisBusiness.com
