By: Paul Gores of the Journal Sentinel
Date: 10 September 2010
Source: Milwaukee Journal Sentinel 11 September 2010 Business Section
Link: http://www.jsonline.com/business/102638414.html
Sales so far this year are down nearly 4% and expected to stay low
Sales of existing homes in the metro Milwaukee area fell for the third consecutive month, dropping 37% in August and dragging totals for the year into negative territory – a place a local industry leader says they may reside until the job situation improves. Realtors sold 946 homes last month, compared with 1,500 in August 2009, according to data released Friday by the Metro MLS Inc. Sales plunged in all four counties – Milwaukee, Ozaukee, Washington and Waukesha – in August, with Washington County posting the worst percentage falloff at 54.5%. Home sales were down 2% in June from a year earlier, and 45.3% in July. For the first eight months of 2010, sales of existing homes have decreased 3.9%, Metro MLS figures show.
The drop in sales was expected because last summer, more buyers were being drawn into the market by a first-time homebuyer federal tax credit of up to $8,000. At that time, home shoppers believed the credit would expire Dec. 1. However, the incentive was extended and expanded by Congress to April 30 of this year. Home sales have declined this summer since the expiration of the tax credit, which was part of Congress’ economic stimulus package. The slump in sales occurred despite mortgage rates that hit historic lows. “From now until everyone declares the economy fully recovered, house sales should track employment numbers pretty closely,” said Mike Ruzicka, president of the Greater Milwaukee Association of Realtors.
Ruzicka said he thinks “household formation” is down, in part because college graduates can’t find work and are going home to live with their parents or renting, which keeps them out of the residential real estate market. He also said he believes rhetoric around the pending elections is having a dampening effect on the attitudes of potential buyers. “With just the negativity of each side saying the other side is going to ruin the world, people are just kind of holding back and saying, ‘OK, I am just going to hunker down until Nov. 2, and if the sun comes up Nov. 3, maybe I’ll look at buying a house,’ ” Ruzicka said.
Realtor Steve Bergelin said the early part of the year “had a lot of buzz” because of the availability of the tax credit, but the buying climate has cooled considerably. “I’ve noticed a significant drop in overall activity – showings on listings, appointments set up. I had lunch with my favorite loan officer yesterday and all he’s really doing is refinancings as opposed to purchases,” said Bergelin, a sales associate with Realty Executives Integrity in Hartland.
Beth Jaworski of Shorewest Realtors in Wauwatosa said low mortgage rates have kept up some interest in the market, and that residential real estate investors still are active. “Most of these people have owned property. They realize, ‘I can buy this house at rock bottom.’ They can rent it out and they can have cash flow immediately. They can rent for a few years, the market turns, and then they pocket the profit and they’ve got cash flow all the while from Day One,” she said.
Ruzicka said home shoppers realize it’s a buyer’s market, and they generally will make an offer 20% lower than the asking price, no matter how reasonable the price is. Jaworski said buyers are very demanding in the tough market right now. “The buyers just think they should get the moon, the stars and their mortgage paid for five years because they’ve heard so much that it’s a buyer’s market,” Jaworski said. “And it is. But with the prices where they are, there are some incredible deals.”
