After five years of decline, it appears the Milwaukee-area housing market finally hit bottom last year.
"I thought 2010 was bad after the (federal) tax credit ended, but 2011 was the worst," said Mike Ruzicka, president of the Greater Milwaukee Association of Realtors (GMAR).
This year the market is finally showing signs of recovery. May, the most recent month of available data, was the 11th consecutive month that the metro Milwaukee housing market posted a double digit increase in year-over-year sales, according to the GMAR. Home sales in Wisconsin increased 18.9 percent in May, compared to May of 2011, according to the Wisconsin Realtors Association. In southeastern Wisconsin, home sales were up 21 percent. The sales increase is a big relief for Realtors.
"It's like this big weight being lifted off of your chest," Ruzicka said.
Home buyers are out in large numbers. After years of low interest rates and low prices failed to entice buyers, the slow but steadily improving economy has led to increased consumer confidence and has brought more buyers into the housing market this year.
"People have started to feel more secure in their jobs," Ruzicka said. 'That's what got people over the edge. I've heard a million stories about (sellers getting) multiple offers, especially in April, May and June."
Prices have shown early signs of increasing in the metro Milwaukee area, but that has been a mixed bag so far. The average price for homes sold in the state rose 1.5 percent in May to $138,000. In southeastern Wisconsin, prices were up 2.3 percent to $147,250. By county, home prices in May:
Racine, $110,950, up 16.9 percent
Sheboygan, $115,000, up 15.3 percent
Walworth, $150,000, up 6.4 percent
Milwaukee, $115,000, up 4.5 percent
Waukesha, $220,000, up 1.4 percent
Ozaukee, $214,250, down 0.2 percent
Kenosha, $121,000, down 1.2 percent
Washington, $165,000, down 2.1 percent
Ruzicka predicted second half housing price increases in the "low single-digits" for the metro Milwaukee area.
Although prices are starting to pick up many homeowners are still reluctant to put their home up for sale until the market gets even stronger. That sentiment combined with the surge in buyers has led to a dramatic decline this year in the inventory of homes for sale in the local housing market.
In May the metro Milwaukee area had 13,250 active listings, which represents 8.3 months of inventory (the amount of time it would take to sell all of the homes on the market), according to GMAR. That compares to a supply of 8.6 months in April, 10.5 months in March and 15.4 months in January. A balanced market is considered 6 to 8 months of supply. Inventory of more than 8 months is considered a buyer's market and inventory of less than 6 months is considered a seller's market.
"Over the last couple of months First Weber and Shorewest have been actively telling their agents, 'We need more listings,'" Ruzicka said.
If inventory levels continue to decline prices should rise and more homeowners will likely put their homes up for sale.
However, the number of foreclosed homes on the market remains a drag on prices. The number of foreclosed homes on the market has declined, but still makes up about one-third to one-fourth of the market, Ruzicka said. Some of the foreclosed homes are being bought by younger buyer looking for a deal, but most are being purchased by investors who are turning them into rental properties, Ruzicka said.
Overall, the housing market is growing again but remains well below the pre Great Recession mega boom. Sales and price appreciation levels will likely be similar to the early 2000s, Ruzicka said.
"Those were good years and everyone's glad to have them back," he said.