There is good news and bad news in the southeastern Wisconsin housing market.
First the good news: the number of homes sold is up. Way up. Home sales in the four county metro Milwaukee area were up 23 percent in the first quarter compared to the first quarter of 2011, according to the Greater Milwaukee Association of Realtors (GMAR).
"The first quarter was the best we've had since 2007," said John Horning, executive vice president of Brookfield-based Shorewest Realtors.
But now the bad news: the prices of homes sold in southeastern Wisconsin continue to decline. In the eight county southeastern Wisconsin region only Kenosha and Walworth counties had an increase in average home sale prices, according to the GMAR. The prices of homes sold in the other six counties in the region continue to fall.
"It's still a buyer's market," said Mike Ruzicka, president of the GMAR.
Buyers are back
Improvements in the U.S. economy, particularly in the job market, seem to have increased consumer confidence, residential real estate professionals say. With interest rates and home prices at rock bottom levels it is a great time to buy a home, but many consumers lacked the confidence to do so previously.
"We had all of the ingredients, low interest rates, large supply, low prices," Ruzicka said. "But consumer confidence was the one missing ingredient."
That appears to have changed and more people are buying homes or planning to buy a home, eager to take advantage of the historically low prices and interest rates.
"(Buyers) are absolutely out in droves," said Kevin Donnell, president and chief operating officer of First Weber Group. "Showings are way ahead of last year. Activity is strong. Agents are very busy. We've waited a long time for this."
"(Buyers) are out there," said Horning. "We're seeing strong traffic on our web site and at open houses."
"Now that more people feel secure in their jobs they want to take advantage of this market," Ruzicka said.
Another factor contributing to the increase in home sales is that buyers may simply have gotten tired of waiting during the long economic downturn. Home sales have slumped since the Great Recession took hold in 2008 discouraging buyers.
"I think people just finally grew tired of their lives being on hold," Donnell said. "No question there is a pent up demand that has been building for four to five years."
The early spring weather in Wisconsin has also helped home sales.
"The weather certainly hasn't hurt," Donnell said. "We caught a break with the weather this year."
Expect more strong sales numbers for the rest of the year. There are a high number of accepted offers for homes in the market, and those sales do not show up in the GMAR data until the sales close, Donnell said. First Weber Group's accepted offers were up 50 percent in the first quarter, he said.
"The accepted offers have been through the roof," Donnell said.
Prices continue to fall
Despite the surge of interest by buyers, the housing market still favors them and home prices in southeastern Wisconsin continue to tumble, much to the dismay of sellers.
The biggest declines in home sale prices occurred in four area counties (according to GMAR):
Racine County, $106,657, down 13.8 percent
Milwaukee County, $112,049, down 8 percent
Ozaukee County, $238,707, down 7.2 percent
Sheboygan County, $120,667, down 3.1 percent
In Waukesha and Washington counties the housing market decline could be close to bottoming out. Both counties had only slight home sale price declines during the first quarter.
Washington County, $188,512, down 1.2 percent
Waukesha County, $248,813, down 1.1 percent.
The housing market for the state line counties, where prices are actually on the rise, might be benefitting from their proximity to the Chicago area. The housing market in those markets are largely supported by buyers from Illinois.
Walworth County, $208,005, up 7.8 percent.
Kenosha County, $133,805, up 1.2 percent.
Lower-priced homes are the strongest sellers in the southeastern Wisconsin market right now, including homes that are being sold in a short sale or after a foreclosure, residential real estate experts say.
The under $100,000 market is up 47 percent for Shorewest, Horning said, and about half of those homes are distressed properties. About 30 percent of Shorewest's total sales right now are foreclosures and short sales, he said.
Foreclosures and short sales are going to continue to be a drag on the market for a while, Horning predicts.
"I think we have a few years left (of foreclosures and short sales)," he said. "The banks still have properties that are not on the market yet, and some new foreclosures are hitting."
The central city area on the north side of Milwaukee was the first, and probably most severe, area in the region hit by the housing foreclosure crisis and it will probably be the last to recover, Ruzicka said. In the suburbs the worst has past and that market should be improving moving forward, he said.
Overall, the level of homes for sale in the southeastern Wisconsin market is shrinking toward a more balanced level, but is still high in favor of buyers, Ruzicka said. The metro Milwaukee housing market had an inventory of 15.4 months (the time it would take to sell all the homes on the market) in January, 14.6 months in February and 10.2 months in March. A balanced market is a supply of about 6-8 months. A supply of less than 6 months is a seller's market.
"We have too much inventory," Ruzicka said.
"I definitely see things moving from a buyer's market to a more balanced market," Horning said. "But I don't see it shifting to a seller's market with a shortage of inventory."
The rise of home sales should help drive up housing prices and reduce inventory levels, Donnell said. People who are able to sell lower priced homes will be able to move up, which should boost higher priced home segments, he said.
The housing market is on the mend, but full recovery will not come quickly.
"It's going to take time for inventory to come back down to a healthy level,” Donnell said.