The Wisconsin State Journal reports that although the south-central region of the state incurred a housing slowdown in 2006, the bubble didn’t burst and the market didn’t crash.
Nevertheless, a period of record growth lasting nearly a decade came to an end in Greater Madison. The number of existing home sales dropped about 7 percent to 14,670 in the six-county region covered by the State-Journal, and declined 11.1 percent in Dane County to 7,097.
The inventory of unsold homes swelled to 10,712 in the region by the end of 2006, up 26 percent from a year earlier, and up 30 percent in Dane County to 5,211.
The high inventory meant even attractive homes in desirable neighborhoods sometimes had trouble finding buyers. As a new year begins, real estate agents find optimism in the fact that the unsold home inventory has been declining gradually in the Wisconsin housing market in past months.
One seller whose story the State-Journal tells is David Schield, who put his house on the market too late to cash in on the housing boom. He bought the house two years ago as an investment to fix up, sell and (in theory) make some money.
After the renovation was finished, he listed the house in with a for-sale-by-owner company in April. When it didn’t sell by August, he hired a real estate agent. He reduced the price to $224,500, but the house still hasn’t sold, and ongoing expenses may push him under the break-even point.
“It took me a little longer to do the work I wanted to do,” Schield said. “I hit the market when it just dried up last year.”
Despite Wisconsin mortgage rates that remain low, the higher inventory also has led to more competition, lower prices and homes that stay on the market longer.
Another story is that of a woman who lived next to Jane Fitchen’s duplex and sold her unit after a week on the market last June for the $250,000 asking price, making Fitchen herself think it was be time to put her own unit up for sale.
The other woman’s unit didn’t have a remodeled kitchen and bathroom like Fitchen’s unit, so Fitchen priced her unit higher at $269,000. It didn’t sell during the summer or fall and now it’s priced between $239,000 and $259,000.
“It’s been really dismal,” Fitchen said. “What’s really frustrating is the one next door had not been updated at all.”
A tougher market has slowed but not reversed price increases. The median sale price was up 2.5 percent in the region to $178,000 last month from a year earlier and up 2.8 percent in Dane County to $220,000.
Madison often escapes (or at least avoids the brunt of) national or regional economic downturns, but that good fortune didn’t exempt the area from the national real estate market slowdown that gripped this nation in 2006.
What’s puzzling is that the local downturn came even as mortgage loan rates have been stable and employment has remained strong, two conditions that usually signal a strong housing market.
“I don’t know why things have slowed down here. I can’t explain it other than people have gotten a little nervous,” said Chad Wuebben, president of the Madison Area Builders Association.
Greed, fear and publicity were three factors that contributed to the end of the housing boom, said John Tuccillo of Arlington, Va., former chief economist for the National Association of Realtors.
“A lot of people out there decided that housing was a get-rich-quick scheme. Ultimately, greed overwhelmed the market,” he said.
When massive amounts of investors and speculators pulled out of hot markets like California and Florida, home values in those areas began to wane.
Many homeowners were afraid they had missed the chance to cash in on their home’s value, and a lot of people became saddled with adjustable-rate mortgage and even interest-only loans. As they put their homes on the market and looked to bail, that built up inventory and reduced prices.
He said news of the boom ending on the coasts seeped across the U.S. and began to affect even traditionally stable markets like the greater Madison area. While the high inventory of unsold homes in south-central Wisconsin has begun to recede, it’s still a matter of concern to experts.
Posted by Richard Barber on Jan 21 2007 under Wisconsin
Paul and Kristen Walker’s story goes against expectations.
Just four days after they put their Wisconsin house on the market, it sold. In fact, the only thing that took them less time was the two days it took to buy their new home on Fox Tail Lane, the Oshkosh Northwestern reports.
“We’d been looking casually at houses for about four months,” Paul Walker said. “(Our real estate agent) called when the right house came around. Within a week, we had bought and sold.”
The Walkers defied trends showing that single-family homes remain on the market significantly longer now, have declined in the volume sold in the area and throughout the New North region and that they sell at lower prices. But, the Walker’s experience also reinforces the positive outlook real estate professionals have that the Wisconsin housing market will rebound quickly.
Home sales in Winnebago County dropped 6.3 percent in the third quarter, along with a a median home price decline of 3.8 percent, to $123,100, despite Wisconsin mortgage rates remaining low.
This is the second quarter in a row that sales declined compared to 2005 figures. In the second quarter of 2006, sales volume dropped 8.7 percent. Median home values did show a modest, one percent increase to $129,300 in the second quarter.
Coldwell Banker Schwab Realty President Dennis Schwab attributed slow sales to a lack of buyers even as 30-year mortgage interest rates remain at about 6.125 percent.
“We’ve kind of depleted that market,” Schwab said. “For two or three years, the market was unbelievably good. It’s not practical to think it could keep going like it was.”
Schwab’s belief that the local housing market leveled off this year after a boom is shared by many. Experts attribute it to the glut of no down payment mortgage loans signed to take advantage of low interest rates.
“It creates a chain reaction as far as the average sale price,” Schwab said. “Right now, you do not have a lot of buyers out there looking for properties seriously because it’s the holiday season. But, I really believe we will end up even or ahead of last year at the end of this quarter.”
But with the current market conditions, sellers don’t just have to sit back and wait for the buyers to make an offer. Walker said sellers can take a few proactive steps to make their homes more attractive.
“We rented a storage shed. Got the clutter out. We made it look more spacious. We did all the right things.”
It’s a buyer’s market, Walker said, and prospective shoppers can be choosy thanks to the larger number of properties available and the shortage of buyers.
“Don’t settle for less than you want,” he said. “There’s a lot of houses out there. Find the style, size and location you want and get the best deal.”
Posted by Richard Barber on Dec 12 2006 under Wisconsin
Until recently, Robert Pennewell was a hot commodity.
Looking to buy a house the past couple of years, the 36-year-old resident of Neenah, Wis., was one of a shrinking number of buyers in a housing market that is cooling significantly after record-high activity.
Some 910,000 fewer home sales were recorded throughout the U.S. during the third quarter of this year compared with the same time last year. That’s a drop of about 13 percent. The 29,425 homes sold in Wisconsin represent a 7.5 percent decline.
With fewer buyers, sellers as a whole are dipping prices — 3.6 percent in the median price, from $138,300 to $133,300, for the quarter in the northeastern part of the state, according to the Appleton Post-Crescent.
Home buyers like Pennewell, willing to hunt and wait, have taken an advantage they likely would not have found just a few years ago. He paid $133,500 recently for a duplex appraised by his mortgage lender at $144,000.
“I finally found what I wanted. I watched and watched the property, and finally decided to make my move,” said Pennewell, who plans to live in the lower level of the duplex and enjoy the extra income from the other unit.
Chuck Peeters, general sales manager for Coldwell Banker The Real Estate Group in Appleton, is not discouraged by the slowdown.
“Last year was a record year for us and this year we’re 9 percent below that, so by all means, we’re not in a poor housing market. We are down a little, maybe a couple of hundred units off of last year’s pace.”
Though he did not have data, Peeters said homes are staying on the market longer as Wisconsin mortgage demand wanes. Still, he said buyers expecting to sniff out bargains like Pennewell’s are more likely to find sellers who also are willing to wait for the price they want.
“Right now, there are some pent-up buyers out there and they are taking their time looking around,” Peeters said. “But come the spring, when more buyers are back in the market, prices will start to rise again. So if you are looking, now is the time to buy.”
Peeters said properties listed by his firm around the Fox Valley ranging between $80,000-120,000 are selling best. Coldwell Banker operates 16 offices in the region.
“We have about 120 homes in that range available now,” he said. Many feature either two or three bedrooms, and at least one bathroom.
Homes ranging between $200,000-300,000 are not selling as well.
“There’s quite a bit of inventory in that range,” he said.
David Clark, a Marquette University professor who compiles data for the Wisconsin Realtors Association, said that while sales are down, Wisconsin’s overall real estate market is more stable than other regions of the country.
The Southwest, South and West in recent years saw a boom in investment real estate, that contributed to an artificial inflation of housing prices. As California mortgage costs have risen by hundreds of thousands, buyers have become priced out of the market en masse, and Golden State sales are down 28 percent so far this year.
The advice for Wisconsin buyers is not to wait. While mortgage rates still are historically low, they have been rising, and are expected to creep up steadily throughout the remainder of 2006 and into 2007.
The Federal Open Market Committee’s raising of short-term interest rates has affected rates on various consumer lending products, from home equity loans to credit cards. Though mortgage rates don’t feel immediate effects from recent Fed action, there have been long-term implications.
Mortgage rates are trending upward, experts say. While they have been fluctuating up and down of late, they are moving up. On-the-fence buyers should make up their minds now and capitalize on the best first and second mortgages they can lock in on.
Posted by Richard Barber on Nov 27 2006 under Wisconsin
Some experts predict a wave of mortgage refinancing next year, especially in markets like California and Florida where soaring prices forced many buyers into risky “pay-option” adjustable-rate mortgages (ARMs) or interest-only loans.
In Wisconsin and throughout most of the midwest, however, where fixed-rate mortgages are more popular and home price increases have been reasonable, the mortgage refinancing share of the market is expected to decline slightly next year.
Low home mortgage rates have resulted in a recent increase in mortgage refinancing both nationally and in southern Wisconsin, according to the Wisconsin State Journal.
With interest rates for standard ARMs close to those for 30-year fixed-rate loans, lenders say people with ARMs that are reaching their term or those with sub-prime loans, such as higher-rate loans for buyers with bad credit problems, should consider refinancing.
Half or more of all coastal California mortgage loans issued in the housing boom’s peak years were estimated to be pay-option ARMs. These loans allow buyers to set the amount of their monthly payments, even if those payments don’t cover all of the interest costs or any of the principal. Interest-only loans allow borrowers to forgo paying anything on the loan principal for a number of years.
Metro Mortgage, which has offices in both Madison, Wis., and Sanibel, Fla., offers pay- option ARMs. While these Florida mortgage options have proven to be very popular, the company has written only a handful in Madison.
Unlike standard one- to five- year ARMs, a pay- option ARM is suitable for investors who plan to sell a home within a few years. But they can cause problems for people buying a primary residence who plan to stay in a home for a long time, because eventually the mortgage can become unaffordable.
“I think there’s going to be a lot of foreclosures,” said Bill Buffo, Metro Mortgage president.
Many homeowners refinance home loans to secure a lower interest rate or to cash in some of their built-up equity.
Tammy Koen, a researcher at the UW Cancer Center, said she and her husband, Kevin, who works at the state Investment Board, refinanced their Fitchburg home last summer at the UW Credit Union within a month of buying it to take advantage of lower rates.
“We basically got lucky and kept our eyes on the rates,” she said, adding that refinancing saved them about three-fourths of a percentage point in the interest rate. Refinancing costs would be made up in a few months at the lower rate, she said.
Nationally, mortgage applications reached a five-week high last week and refinance applications were up 11 percent. Refinance applications are up about 10 percent over the past several weeks from a year ago at the UW Credit Union, said Vice President of Lending Mike Long.
“Folks are taking a look at their adjustable rates and seeing that fixed rates are pretty low. Rates are going to hold steady for the foreseeable future,” he said.
Long said while the credit union offers interest-only mortgages, they’ve generated very little activity. Not surprisingly, people in the Midwest seem to be fairly conservative with their finances. Historically, interest rates drop during the winter, which may spur more refinance applications.
At Park Bank, mortgage lending vice president Dan Leeder said that some of his refinance customers are consolidating home equity loans or cashing out some of their equity.
“A lot of people have already done it and the people who are doing it now are rolling other debt in. I don’t foresee a big boom here unless interest rates fall again,” he said.
Below are the projected mortgage rates through 2008, according to the Mortgage Bankers Association. While these are only estimates, it should give you an idea of what the experts predict.
