Market Shift | Milwaukee Real Estate

Market Shift – Rising Rates and Stock Market Fluctuations

Where are we seeing the biggest changes in Real Estate? Your questions answered.

Have we hit peak? Possibly in luxury, but then again, maybe not. The Milwaukee luxury market may have hit peak on or about April 24^th, 2022. I determine that by looking at showing activity, number of houses under contract, and days on market. The biggest shift appears to be in the luxury market in the last three weeks with the wealthiest borrower’s activity slowing. The luxury market pulled back the last week of April with lower showing activity most likely due to a rise in rates and a dive in the stock market. The cost of goods, supply chain issues, and shortages in materials driving costs of construction and remodeling higher impacted the higher end of the market first. With the luxury buyer not feeling quite as wealthy as they did in the first quarter, activity overall slowed indicating that a correction may likely be underway and that could be good news for high-end buyers. https://www.marketwatch.com/picks/the-market-is-shifting-heres-exactly-when-3-economists-predict-competition-in-the-housing-market-will-decline-01652528876

How are Luxury Home Sales?

Luxury Homes sales here in the Milwaukee Metro Market are generally defined as house sales above the jumbo loan rate of $647,250.  Showings in this market segment are down over February 2022 depending on community and community supply. Fewer showings generally translate to fewer offers and less competition. The high end of the market generally sees the change first because there are fewer borrowers in this segment. Sales are still very robust though and we are still seeing prices at about 17% higher than the year before. The activity at a million and above is beginning to cool in the last three weeks with the rise in interest rates. Buyers are seeing some of their first adjustments in pricing in reaction to rate fluctuations. In January of 2022 borrowers could still lock in rates at 2.8% and have a million-dollar mortgage at a fixed $4100 monthly payment. Today, the 30-year fixed rate is 5.6% and that same home is now $5740 a month. A change of over $1640 a month. When you look at this metric along with the rising costs of goods, prices will adjust to meet the cooling demand of the market. The housing supply in luxury is now growing and with more supply, buyers should see a relaxation in pricing.

Are Prices Holding Steady in the Median Price Ranges?

Yes, and in some cases still rising, especially in the first-time home buyer category and middle of the market. Unlike luxury, the supply is thin in this portion of the market due to demand. The listed inventory in Milwaukee’s North Shore is down nearly 18% over last year this time creating more demand still and higher prices in this location. There is just not enough housing supply to meet the demand for this portion of the market and as rent prices increase, demand for entry level and middle level housing will stay very competitive for the foreseeable future. Buyers looking for their first home should expect competing offers, escalating prices, and low inventory still. Unfortunately, with the rise in rates, it could not be worse news for the first-time home buyer. https://fortune.com/2022/04/06/high-mortgage-rates-and-low-inventory-make-this-a-hard-time-for-first-time-homebuyers/

What are showings like if I do list my Home?

Showings are robust and very high quality. Most buyers who are viewing homes are not “shopping” they are ready and likely need to buy a home. If you are in a community with low housing inventory, you are very likely to sell and for a record-breaking price. In luxury, expect fewer showings than in the first half of the year, price your home just below the market rate of January 2022, observe rate hikes and shift your home selling strategy accordingly. The formula to success in selling at any price level is all in the showing activity. High activity equals great success.

Are Homes still getting multiple offers?

Yes, at a very fast clip for all homes $500,000 and below. There is still very limited inventory. Homes currently on the market are selling at 104% of sale price with a premium above that for anything in exceptional condition with new kitchens and baths. If you are a probable seller, getting your home on the market now is the best advice I have for sellers. It may seem contrary to what you think but summer is seasonally slower for Milwaukee. Milwaukee’s spring market is usually over by June 15^th when school lets out. This year may be exceptionally slow with Covid restrictions finally lifted and the summer festival season back in our area.

What does the future look like?

Home buyers, stay prepared to move fast.

Bottom line: Be as prepared as possible so when the right property comes along, you’re ready.

Check your mortgage eligibility and reach out to a local lender so you know which loan type works best for you and how much home you can afford. I think we are going from hot, hot, hot market to a hot market still.

So overall it is not great news for first time home buyers, but being prepared and anticipating what could come is very important to probably success. We know what most likely will be and this can help in making good financial decisions as it pertains to the sale of your home or buying a new one. Markets go up and markets go down. I am pretty bullish about the future of real estate even if we enter a bear market. It is how you navigate the market you are in that sets you apart. You may sell in a declining market but if you are also a buyer you are buying in a declining market. There is a silver lining to be found.