The Milwaukee housing market is undergoing significant shifts, with data provided by the Greater Milwaukee Association of REALTORS® shedding light on the trends and challenges facing the region. In this update, we delve into the recent statistics and insights that provide a comprehensive overview of the current state of the Milwaukee housing market.
Milwaukee Housing Market Update
The Milwaukee housing market experienced a notable decline in home sales during the 3rd quarter of 2023. Sales were down by a significant 22.9%, reflecting a challenging period for the real estate sector in the metropolitan Milwaukee area.
Furthermore, the month of September witnessed a substantial 19.3% drop in home sales, highlighting a continued trend of decreased activity in the market.
Metropolitan Milwaukee's real estate market faced multiple challenges in the 3rd quarter, with both quarterly and monthly sales declining. However, it's important to note that this drop in home sales can be attributed to a shortage of inventory rather than a lack of buyer interest.
The deficiency in inventory can be attributed to two key market forces: new construction and new listings. In August, there were 9.9% fewer building permits issued in the 4-county area compared to the same period in 2022. Over the January to August period, new construction witnessed a significant 24.6% decrease, continuing a trend of low production in the real estate sector. Typically, new construction would add 3,000 to 4,000 units to the market annually, but this segment has been down by about 50% since the Great Recession.
While there was a positive development with new listings increasing by 2.5% in September, marking the second consecutive month of growth after a 17-month drought, new listings for the 3rd quarter were down by 17.6%.
Market Highlights
Several key highlights emerged from the Milwaukee housing market update:
Demand for Listings Under $500K
There remains high demand for listings priced under $500,000, showcasing the affordability factor in the market.
Listing Growth
Listings showed signs of growth for two consecutive months, providing some optimism for the market's future.
Average Sales Prices Up 5.7%
The average sales prices experienced a notable increase of 5.7%, translating to an average price hike of $22,589.
Challenges Ahead
Despite the positive aspects, the supply of inventory on hand is only sufficient to meet 3.1 months of buyer demand. When units with an active offer are subtracted, this level drops to a mere 1.4 months. This situation is slightly better than August's 2.9 months of inventory but falls well short of the 6-month benchmark considered a balanced market.
Real estate brokers have reported that many homeowners with low mortgage interest rates are hesitant to list their homes due to concerns about taking out a new mortgage at higher interest rates for a new property.
The Impact of Low Construction and Listings
The historically low level of new construction and a lack of new listings in the 4-county area have resulted in a significant 5.7% price increase, equivalent to $22,589. However, there is a long-term danger if additional supply, particularly single-family and condominium units, is not created.
Thousands of potential homeowners may be forced into rental units, preventing them from building wealth through home equity, which could have significant consequences in the future, such as insufficient equity for college expenses, home remodeling, or emergencies.
Inventory Analysis
In terms of seasonally adjusted inventory, it would take 3.1 months to sell the existing homes on the market in September. When subtracting listings with an “active offer,” the inventory drops to just 1.4 months, indicating a significant shortage.
To achieve a balanced market, the market would need an additional 4,090 units to push inventory to six months. A balanced market is typically defined by having six months of inventory, with anything below favoring sellers and anything above indicating a buyer's market. The Milwaukee housing market continues to face challenges that require careful consideration and strategic planning.
Milwaukee-Area Housing Market Forecast 2023-2024
The Milwaukee-Waukesha-West Allis housing market has been a topic of interest for many, and Zillow's latest data provides valuable insights into its current status and what we might expect in the coming year.
As of September 30, 2023, the average home value in the Milwaukee-Waukesha-West Allis area stands at $328,957. This represents a substantial 7.6% increase over the past year, indicating a healthy growth trend in home values. Additionally, homes in this area tend to go pending in approximately 16 days, underlining the strong demand for housing in the region.
Market Forecast
Zillow's 1-year market forecast, as of September 30, 2023, indicates a 0.9% expected growth in the housing market. This suggests that while the market has been experiencing positive growth, it may see a slightly slower pace in the coming year.
Market Metrics
Here are some key metrics to consider:
Median Sale-to-List Ratio (August 31, 2023): 1.031
This ratio suggests that, on average, homes are selling for slightly above their list price, indicating a competitive market where sellers may have the upper hand.
Percent of Sales Over List Price (August 31, 2023): 68.5%
A significant percentage of sales occurring over the list price indicates strong demand and competition among buyers.
Percent of Sales Under List Price (August 31, 2023): 22.9%
While most sales are happening above the list price, a portion of sales is still occurring under the list price, which may present opportunities for certain buyers.
Median Days to Pending (September 30, 2023): 16
The median time it takes for a property to go pending is relatively short, suggesting a swift-paced market where homes are in high demand.
Is the Milwaukee Housing Market Slowing Down?
While the Milwaukee housing market has seen impressive growth in the past year, the 0.9% 1-year market forecast suggests a potential slowdown in the coming year. However, it's essential to remember that real estate markets can be influenced by various factors, and a slight slowdown does not necessarily indicate a dramatic shift.
Is Milwaukee a Buyer's or Seller's Market?
Milwaukee appears to be a seller's market at present, as indicated by the high median sale-to-list ratio, a substantial percentage of sales over list price, and the relatively short time it takes for properties to go pending. Sellers in the Milwaukee-Waukesha-West Allis area currently have the advantage in negotiations, which is important for prospective buyers to consider when entering the market.
In summary, the Milwaukee housing market is showing signs of strength with rising home values and robust demand. However, the 1-year market forecast suggests a potential slowdown. Whether it's a buyer's or seller's market depends on various factors, but at present, it appears to be favorable for sellers. As with any real estate investment, it's essential for both buyers and sellers to stay informed and work with experienced real estate professionals to navigate the market effectively.
Milwaukee Real Estate Investment Overview
Milwaukee's real estate market seems to be doing well, with steady growth in housing prices over the past year. The typical home value in Milwaukee-Waukesha-West Allis is $328,957, which represents an increase of 7.6% over the past year. Moreover, Zillow's one-year market forecast for Milwaukee-Waukesha-West Allis is 0.9%, indicating a stable and consistent growth rate in the housing market. However, it is important to note that the typical home value can vary depending on the neighborhood and housing type.
The Milwaukee real estate market seems to be a good option for affordable housing development, with Bear Real Estate Group receiving $20.6 million in financing for the construction of Michigan Street Commons, a 99-unit fully affordable housing development in Milwaukee.
Milwaukee's foreclosure rate is expected to be lower than ever before, accounting for less than 1% of all mortgages, less than half the average historical rate of 2.5%. However, the GDP growth rate is predicted to be 1.3%, indicating a significant slowdown. It is unclear how this will impact the real estate market in Milwaukee.
Real estate investment is active in Milwaukee, with Kyle Mack, owner of Mackximus LLC, a real estate investment company in Milwaukee, discussing his business in a video interview. Additionally, PIMCO, an investment management firm, manages assets for individual investors around the world.
Milwaukee is investing in its infrastructure, proposing to create the Vel R. Phillips Plaza, situated south of Wisconsin Avenue between North Fifth Street and North Vel R. Phillips Avenue. The city is prepared to move forward on the project which will add to the positive.
There seem to be various ways to invest in the Milwaukee real estate market, such as buying homes to renovate and resell, investing in real estate courses to gain knowledge about the industry, and investing in property management companies that help landlords maximize their investment properties in Milwaukee.
In terms of commercial real estate, Milwaukee's downtown office market has its strengths, highlighted by Fiserv's pending headquarters move from Brookfield to HUB640 by the end of 2023, and Northwestern. However, more Milwaukee office buildings may become apartments in the future.
Overall, Milwaukee's real estate market appears to be doing well, with steady growth in housing prices and various opportunities for investment in the residential and commercial sectors.
Top Reasons to Invest in Milwaukee Real Estate Market
Milwaukee is a city in Wisconsin that offers real estate investors a lot of opportunities. With a population of over 590,000 people, it is the largest city in the state and offers a diverse range of neighborhoods, property types, and investment opportunities. Here are some of the top reasons to consider investing in Milwaukee's real estate market:
- Affordability: Compared to other major metropolitan areas in the United States, Milwaukee offers relatively affordable real estate prices. This means that investors can find deals on both residential and commercial properties that are priced lower than similar properties in other cities.
- Strong rental demand: Milwaukee has a strong rental market, with a high percentage of residents who rent their homes. According to data from the U.S. Census Bureau, over 50% of Milwaukee's residents are renters. This creates a significant demand for rental properties, particularly in areas that are close to downtown, universities, or other major employers. As of March 2023, the average rent for a 1-bedroom apartment in Milwaukee, WI is currently $995. This is an 11% increase compared to the previous year. Over the past month, the average rent for a studio apartment in Milwaukee remained flat. The average rent for a 1-bedroom apartment increased by 1% to $995, and the average rent for a 2-bedroom apartment increased by 9% to $1,085.
- Growing economy: Milwaukee has a diverse economy that is experiencing steady growth. The city is home to a range of industries, including manufacturing, healthcare, finance, and education. According to the Milwaukee Economic Development Corporation, the city has seen a 13.5% increase in employment since 2010, and the unemployment rate has dropped from 9.5% in 2010 to 3.5% in 2022. A growing economy typically translates to increased demand for real estate, both from businesses and from residents.
- Low vacancy rates: With strong demand for rental properties, it's not surprising that Milwaukee has a relatively low vacancy rate. According to data from RentCafe, the overall vacancy rate in Milwaukee was 5.5% in 2021, which is lower than the national average of 6.8%.
- Urban revitalization: Milwaukee's downtown and surrounding neighborhoods have undergone a significant revitalization in recent years, with new development projects and investments in public spaces. The city has also seen an increase in younger residents who are attracted to urban living. This has led to an increase in demand for properties in walkable neighborhoods that offer amenities like restaurants, bars, and shopping.
- Favorable landlord-tenant laws: Wisconsin has landlord-friendly laws that make it easier for property owners to manage their rental properties. For example, landlords can evict tenants for non-payment of rent with just a five-day notice, and there are no limits on the amount that landlords can charge for security deposits. This can make investing in rental properties less risky for investors.
- Availability of financing: Like many other cities, Milwaukee has a range of financing options available for real estate investors. Local banks and credit unions offer commercial real estate loans, and the city has a range of public-private partnerships that provide funding for development projects. Additionally, there are a variety of federal and state programs that offer to finance affordable housing projects and other real estate development initiatives.
Therefore, Milwaukee's real estate market offers several compelling reasons to invest. The city has a strong economy, affordable prices, a growing rental market, and a diverse population. These factors, combined with tax incentives and a robust infrastructure, make Milwaukee an attractive location for real estate investors. However, like any investment, there are risks involved, and investors should carefully consider their options before investing.
Buying or selling real estate, for a majority of investors, is one of the most important decisions they will make. Choosing a real estate professional/counselor continues to be a vital part of this process. They are well-informed about critical factors that affect your specific market areas, such as changes in market conditions, market forecasts, consumer attitudes, best locations, timing, and interest rates.
NORADA REAL ESTATE INVESTMENTS strives to set the standard for our industry and inspire others by raising the bar on providing exceptional real estate investment opportunities in the U.S. growth markets. We can help you succeed by minimizing risk and maximizing profitability.
Another market to go for diversifying your investments is the Dallas housing market. Dallas, TX is a great market because it has a strong economy and constant population growth and will make your pockets bigger. As rents go up smart investors should invest in Dallas.
Similarly, Houston is another great market for investing in real estate for your early retirement. Houston housing market is becoming a hotbed of buyer activity that could be beneficial for real estate investors; just ask the multitude of overseas investors who are choosing Houston as the city of choice to invest in for the foreseeable future.
Let us know which real estate markets you consider best for real estate investing! If you need expert investment advice, you may fill-up the form given here. One of our investment specialists will get in touch with you to discuss all facets of searching for, buying, and owning a turnkey investment property.
References
- https://www.gmar.com/resources/research-statistics/2021-housing-statistics
- https://www.redfin.com/city/35759/WI/Milwaukee/housing-market
- https://www.zumper.com/rent-research/milwaukee-wi
- https://www.zillow.com/milwaukee-waukesha-west-allis-wi/home-values/
- https://www.realtor.com/realestateandhomes-search/Milwaukee_WI/overview
- https://www.neighborhoodscout.com/wi/milwaukee/real-estate
- https://www.multihousingnews.com/bear-real-estate-lands-21m-for-milwaukee-affordable-project/
- https://www.bizjournals.com/milwaukee/video/6082058683001
- https://www.expertise.com/wi/milwaukee/property-management
- https://www.milwaukeemag.com/milwaukee-mayor-proposes-investing-15-million-to-create-vel-r-philips-plaza/
- https://www.jsonline.com/story/money/real-estate/commercial/2023/03/09/more-milwaukee-office-buildings-will-likely-become-apartments/69963549007/
