Housing Shortage Driving Prices Higher

Despite a global pandemic, the Milwaukee area housing market didn’t slow down in 2020. And the head of the Greater Milwaukee Association of REALTORS (GMAR) thinks 2021 will be even busier.

“When the world turned upside down because of coronavirus, we thought uh-oh, this is going to be a really bad year,” said GMAR president Michael Ruzicka in an interview.

Things slowed down initially, even though real estate was designated an essential service under the state Safer at Home order.

Showings became virtual, as much as possible. Ruzicka said trends towards Zoom and 360-degree photos accelerated. People only went to the property if they were really interested.

“We really, really discouraged any kind of open houses,” said Ruzicka, noting that the few that did happen drew sharp criticism from other real estate agents.

Individual showings moved to include electronic key boxes, which restrict the number of people let inside. “We would have two or three cars parked out in front of a house for a showing,” he said.

Starting in September, the transaction volume surged. The total volume of transactions from that point on was up over 20% year over year.

“Words escape me to explain what happened in the latter part of the year,” said Ruzicka. But he expects it to continue. Interest rates and employment levels are expected to remain steady.

There are problems on the horizon. “We are still faced with a problem of supply,” he said, echoing comments from a data-driven, pre-pandemic interview. “We do not have enough units to satisfy the market.” Notably, many new buyers are Millennials now in their mid-30s entering the market for the first time.

The result is steady price increases. The shortage is particularly acute in the $250,000 to $300,000 price level according to GMAR data.

There was an average of 2.8 months of inventory available in the Milwaukee area in 2020, down from 3.5 in 2019 and 3.6 in 2018. “These are remarkably low numbers,” said Ruzicka. “We want to be around six months.”

“There is going to really be a crunch in the near future where affordability is gone because there aren’t properties for people to buy,” he said.

Ruzicka said introducing new supply anywhere in the area will help address the issue across the board. “You have to look at the whole metropolitan area as one market,” he said. Each community has its own flavor, but they exist in the same market.

According to Ruzicka, a recently-announced plan for a new neighborhood consisting of hundreds of homes on a former industrial site in Oak Creek is an example of the type of development the area needs. “We are building too many apartments and not enough condos or single-family homes.”

Schools are another issue distorting the market. “The perception is that Milwaukee Public Schools isn’t competitive with the suburban.” He cited the example of a Sherman Park home being worth hundreds of thousands less than a similar home just a couple of miles west in Wauwatosa. The organization publicly endorsed the April MPS referendum that boosted funding for the district.

“School districts and $300,000 homes are what we need,” said Ruzicka.