Posted on 05/01/2023 7:06:52 AM PDT by Diana in Wisconsin
MADISON, Wis. -- As the average home cost in Madison soars to $424,000 in 2023's latest city assessments, experts say new homeowners are unlikely to face decreases in value in the near future despite the rapid increase.
President Melissa Bjerke Markgraf and CEO Ruth Hackney from the Realtors Association of South Central Wisconsin joined Naomi Kowles on For the Record to explain the impacts of Madison's red hot housing market after city assessments rose 13.5% from the previous year.
"The last three years, even during the pandemic, were record-setting volume years," Bjerke Markgraf said. "It's shocking double digits going up. Historically, we've been pretty insulated in terms of how that affects our overall economy."
Average home costs in Madison now rival or exceed those of Milwaukee, Hackney said, where the city proper is roughly twice Madison's size. That's left beginning homebuyers in a tough position.
"We just have an inventory problem. We don't have a demand problem; we have a supply problem," Bjerke Markgraf said.
The hallmarks of Dane County's relatively constant growth and resulting housing shortage shouldn't be called a housing bubble in the style of the 2008 recession, both said, in part due to Madison's relative insulation from the recession as well as a difference in economic climates.
"I've lived through the Great Recession as an agent [in the Madison area]. I've been doing this since 1997, and I lived through that. It's a different climate right now; the lending practices are considerably stronger. Again, it's not a demand issue; it's a supply issue."
Homeowners, particularly those buying at today's prices, shouldn't fear for the future of their home value -- but should expect a plateauing of potential increases back down to four or five percent, Bjerke Markgraf said.
"The supply issues that we're having now, they started in 2010," Hackney said. "It's going to take a decade to build us or renovate us out of the issue we're in right now."
"Again, it's not a demand issue; it's a supply issue."
Keep repeating that until you believe it!
No repeat of 2008's housing problems for 'The People's Republik of Madistan.' No sir! Everything is fine...IF you kids can afford a 'starter home' of $424K!
I don’t understand the housing market.
House prices have zoomed far beyond what middle class people can afford. Home prices for an average home almost everywhere in America, are far beyond the average incomes of people would would buy those homes. The average income household cannot qualify for a mortgage in an amount needed to buy an average house.
It seems unsustainable long term, that this can continue. Who is buying all these houses at such inflated prices?
Before long you’ll have to submit your ESG score in order to qualify for a mortgage.
/s...for now.
What was not mentioned are property taxes, which in Madsion and surrounding communities are astonishingly high. In FL I have a home that has a present market value essentially equal to the market value of my last home in the Madison area. Here in FL the property taxes are approximately $3800/year. In Middleton Hills, same market value home - nearly $14,000/year(!)
People vote with their feet for a lot of reasons. The high property taxes, extreme narrow mindedness of the political environment in the city, and narrow career paths (in the 90's) expelled me like being shot from a canon. Now, what may be retaining some is the presence of new employment sectors that pay extremely well (I'm thinking of Epic, but imagining that Exact Sciences, Google, and others I have missed are paying large $$ to young people, and they are staying.)
“Who is buying all these houses at such inflated prices?”
The biggest new factors are major “investment firms” buying single family homes in large quantities.
They are confident that with their lobbyists in DC that it will be “heads they win, tails the taxpayer loses” so that makes it an easy bet.
Invitation Homes. Blackrock.
Huge investment funds are buying single family homes and turning them into permanent rentals. Some may be fronting for China’s national investment fund. Anyway that is what has been outbidding individuals trying to buy homes. There’s probably no way that this will stop.
College towns have often become absurdly expensive places.
Prices in Austin, Texas are extremely high.
The young college graduates like the large prospective availability of marriage partners.
https://www.realtor.com/realestateandhomes-detail/2227-Branch-St_Middleton_WI_53562_M79820-31388
The house was built in 1958. It’s about 65 years old.
From realtor.com:
“Home price $595,000
Monthly payment $4,380
30-Year Fixed loan at 6.918%
Principal & Interest $3,141
Property tax $1,140
Home Insurance $99
Total due at close $142,800
Down payment (20%) $119,000
Estimated closing cost (4%) $23,800”
https://www.realtor.com/realestateandhomes-detail/2227-Branch-St_Middleton_WI_53562_M79820-31388
The house was built in 1958. It’s about 65 years old.
From realtor.com:
“Home price $595,000
Monthly payment $4,380
30-Year Fixed loan at 6.918%
Principal & Interest $3,141
Property tax $1,140
Home Insurance $99
Total due at close $142,800
Down payment (20%) $119,000
Estimated closing cost (4%) $23,800”
I would suggest you watch videos on YouTube by a guy who calls his company Reventure Consulting. I have no relationship to him whatsoever. I discovered his videos about a year ago. He was the first to call a top to the general US real estate market.
However, ALL real estate is local. So, IF people can afford a house in San Jose, CA it has very little to do with what a house sells for in Madison, WI.
Case/Shiller developed a index about how real estate was affordable based on what the average income was in the metro area. This guy at Reventure Consulting breaks it down by county/metro area. So, while Nashville’s real estate market has already gone down 30% form the top and Boise is down 20% from the top other markets like Manchester/Nashua, NH have continued to go up.
As have markets like Oklahoma City, Louisville, Richmond, Myrtle Beach, and several others.
What he points out are the markets that have boomed over the
last 5 years and have gone up faster than people in that area can afford. Again, some of this has to do with Baby Boomers retiring and moving south. Which is why places like Tampa and Miami continue to go up even though prices are very high in comparison to their incomes in their respective areas.
Real estate markets take more than just a couple quarters to come down. It took five to ten years to go up. It will take 2-4 years to come down.
Down payment assistance:
“Are you (or a co-borrower) a current or former member of the U.S. military?
Select all that apply.
Active Duty
Reserve/National Guard
Veteran
Surviving Spouse
Are you (or a co-borrower) Native American?
Yes
Do you (or a co-borrower) work in any of these professions?
Select all that apply.
Education
Law Enforcement
Firefighter
Healthcare
Do you (or a co-borrower or dependent household member) have a disability?”
“The average income household cannot qualify for a mortgage in an amount needed to buy an average house.”
In the 2008 period interest rates shot up for about one year according to my old stock brokerage statements I scanned into my PC.
Don’t expect a $100,000 discount because of a temporary interest rate spike.
I would guess that very few people buying $500-600K or more home are first time home buyers. Meaning that they are also selling a home they had $500K or more equity in.
When I was a teen-—I clearly remember that Madison was second ONLY to Washington DC for COST OF LIVING
That was in the late 50’s.
Mr. & Mrs. Yuppie voted to get $10,000 student loan handouts.
What these “highly educated” people don’t know is new housing complexes often must have Section 8 units that they might be paying $50,000 extra for.
The extra $50,000 bumps up housing prices and property taxes across the whole area.
“Institutional grant aid: Aid from colleges and universities grew rapidly over the past 10 years, from $50.2 billion (in 2021 dollars) in 2011-12 to $74.4 billion in 2021-22.
“Loans
$94.7 billion: The total amount that parents and students borrowed in federal and nonfederal loans to pay for postsecondary education in 2021-22.
“This was the 11th consecutive year that annual borrowing declined.”
https://research.collegeboard.org/trends/student-aid/highlights
Most student loan money goes to finance grants.
Marxist redistribution doesn’t stop after the diplomas get handed out. Look carefully at your 1040 forms.
The income demands are driven by the COST OF HOUSING-—and OTHER COSTS OF LIVING
I remember in the 50’s that Madison COL was 2nd ONLY to WASHINGTON DC.
It is not a surprise that the county housing a major university system is one of the highest housing markets in the country or state.
Here in NH some of the most expensive markets are where UNH and Darmouth are located. Universities provide many six figure jobs. Some are high six figures. FYI, the highest paid person working for the state of NH is the UNH hockey coach.
In addition, there are lots of housing around colleges where six or more students live in a house. These are great rental houses for the house owner. You have guaranteed renters every year whose parents pay big money for their kid to live in a dumpy property. I know I lived in a couple in Syracuse.
And you didn’t even mention mortgage rates?
But for what some are being forced to pay in rent, maybe a mortgage with high interest rates are with it.
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