Wisconsin Housing Market Shows Shifting Dynamics

After several years of soaring housing costs, there’s good news for renters in the Wisconsin housing market - the trends are swinging back in the other direction.

According to The Capital Times, the Madison apartment vacancy rate has dropped to 5.07 percent. That’s down from spring 2005 when vacancy rates were running over 7 percent.

Apartment industry officials say the rise in mortgage rates has priced many out of the market.

Specifically, it has left on the outside looking in those who were right on the edge of qualifying for a home loan, but are now stuck paying rent.

In addition, some people with adjustable rate loans or other more risky home loans such as interest-only mortgage products have lost their homes, forcing them to start renting again.

“The chill that’s hit the housing market has been good for the apartment business,” said Nancy Jensen, executive director of the Apartment Association of South Central Wisconsin.

With roughly half of Madison residents renting and a solid base of UW-Madison students, the apartment industry has long been a stable component of the local economy.

But vacancy rates began to climb during the housing boom as scores of renters took advantage of record low Wisconsin mortgage rates to buy homes. That left many landlords with empty units and forced some to offer free months of rent or other perks to lure tenants.

In fact, the rental market was so bad that several large complexes were eventually converted into for-sale condominiums as real estate investors tried to take advantage of the demand for owner-occupied housing.

At one point in 2005, several areas of the city were seeing vacancy rates in the double-digits. But figures for the last quarter of 2006 show that vacancy rates had fallen back to earth a bit.

Downtown landlord Steve Brown said this spring will determine whether the apartment market has rebounded or not. He said the number of new dorm rooms opening on the UW-Madison campus - including 600 bedrooms in the residence hall at Dayton and Park streets - has added to the city’s rising inventory.

“I just haven’t seen the market downtown tighten noticeably,” said Brown. “It’s too early to say we’re back.”

The city’s affordable housing ordinance had also slowed the construction of new apartments in the city, which has contributed to a tighter market. She said developers were reluctant to build new rental units if they were forced to price them for low-income residents.

But the Apartment Association was successful this fall in having the city’s zoning or “IZ” ordinance overturned in court. The for-sale portion of the IZ ordinance was not challenged and remains in effect.