Now that fall has arrived, many of my clients have asked about the real estate market and what is the best time to sell. Most wonder if this healthy market will continue. Many are concerned about a future recession or "stumble". I thought I would share my views on the market as well as provide you with my thoughts about the future of real estate in our local market.
Spring was one of the best we've seen for sellers. There were many more buyers than homes offered which lead to multiple offers in many cases. Home prices increased in most areas by about 5%-7%. We have seen a slow down of activity June-present as many buyers called it quits as they could not find a home. Many sellers decided not to sell because they wanted to cash in on the appreciation. However, the market is still strong. Typically, activity will increase in October and then peak at Thanksgiving. After November the market generally slows down again until mid-February. These selling patterns are important as to timing a sale for the best results.
Housing inventory is down with homeowners holding off on listing their homes for a few reasons. One is that baby boomers who want to downsize find that the choices for their next home are few and far between. The solution is to hold off putting their home on the market and waiting for better choices for their new somewhat smaller ranch or condominium. The second reason would-be sellers are holding off is the appreciation due to this lack of inventory. The less homes on the market, the higher the prices will go. After the recession, many homeowners want to recover and go beyond the prices of the peak market prices of 2008. This is understandable, especially if this is the last equity a homeowner will have before going into a senior apartment or community. This leaves us with those who feel they would improve their lives by moving now to a better lifestyle for health or quality of life issues. These sellers are seeing multiple offers and excellent results as to the price they obtain. Less competition means higher prices and less time on the market.
As for the future of home values, after over 35 years watching patterns and fluctuations, my feeling is that home values will continue to increase over the next 3-5 years barring any national or world events that are unpredictable. The demand for senior housing will increase as the boomers are ready for downsizing and selling. Boomers will want one level condominiums, ranch single family homes, or senior apartments with amenities that match their needs. 50plus homeowners will relocate near their children and grandchildren or decide to move to a warmer climate. This huge group of would-be sellers will be selling in the next few years which could create an over stock of inventory and stabilize home values. I expect that surge of inventory to begin next spring after analyzing demographics of baby boomers who are currently ages 60-72. They will be looking for housing options with smaller lots and less maintenance. Many will opt for apartments or communities that do not require a purchase but most likely a rental situation.
My advice is to assess your current lifestyle and understand that the real estate market is always a moving target. The most important factor is quality of life. Don’t wait for health incidents to determine when and where you will move. That is often the toughest move to make!
Here are the latest statistics from the Greater Milwaukee Association of Realtors
September 12, 2017 – Home sales were up 1.7% in August in the Metropolitan Milwaukee market.
The increase in sales is particularly striking given that sales that occurred in August came from inventory that existed in June and July, when inventory was down 2.9% and 0.5%, respectively. In other words, buyers who closed in August selected their homes from a pool of homes that existed in the earlier summer months.
August was the sixth month of the year that saw increased sales. The underpinnings of the local economy are solid, with employment, interest rates, and lending all performing well. The strong economy is producing interest in home buying, particularly among first-time buyers, who brokers estimate comprised 30% - 40% of the market this summer.
Through August, the 4 county market is 1% ahead of sales in 2016 (14,237 in 2017 vs. 14,100 unit sales in 2016).
Listings Up in August
August was only the 3rd month of the year with an increase in listings.
The growth in listings is a welcome change from what brokers have experienced. The extra listings will help REALTORS® working with buyers searching for a home.
Based on a GMAR consumer survey conducted in May, some sellers stated they were holding off on listing until they could command higher prices. The August data indicates that many of those sellers are satisfied with the prices their REALTOR® is indicating their house is worth.
Comparing 2017 to 2016, listings are up 0.7%, with 20,476 units in 2017 versus 20,324 units listed through August of 2016.
The seasonally adjusted inventory level for August was 4.9 months. The seasonally adjusted level was 5.8 months in August 2016.
Subtracting the 2,140 listings with an active offer from current listings, presents an effective inventory level of 2.9 months. A year ago, the same calculation showed August’s inventory level at 3.5 months.
While the increase in listings in August is welcome, the drought in homes available for sale is still critical, leading to buyer frustration, particularly among those searching for homes under $350,000. Buyers are seeing properties snatched up before they’ve had an opportunity to view them.
Many “move-in ready” homes are seeing multiple offers, but not the size or scale we saw in the early part of the last decade. The early 2000’s were marked by buyers irrationally bidding up home prices by 10% - 20%, assuming they would reclaim the value as the market appreciated.
In the current market, buyers are bidding prices up, but they are constrained by their borrowing ability and their lender’s appraisal.
The Greater Milwaukee Association of REALTORS® is a 4,000-member strong professional organization dedicated to providing information, services and products to “help REALTORS® help their clients” buy and sell real estate. Data for this report was collected by Metro MLS, Inc. a wholly-owned subsidiary of the GMAR.