Milwaukee - State of the Market

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Milwaukee - State of the Market

Marcus Auerbach
Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes

I am on record for stating publicly that I don't see a down turn in 2019, at least for our market here. We are technically way overdue for a downswing after 7 years of going up, but I can't find it in the data. On the most fundamental level it comes down to supply and demand - and while we have very strong demand, supply keeps shrinking! 

13.5% fewer houses active for sale and fewer new listings than last year. We see a similar picture in the surrounding counties and across all price points. As of late even luxury listings are getting multiple offers. I hope this is just winter weather related (we had a very cold winter) and we see more inventory soon. 

Also note how the median asking price has shifted up to 120-160k, which BTW is still far off replacement cost and cost of new construction cost. You would think that more people would cash out and sell, many are definitely in an equity position and mortgage rates have fallen again (totally unexpected as of last year) to about 4%.

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Taylor Chiu:

@Marcus Auerbach Thank you for posting this! Interesting that inventory is down so much, despite high demand. Have any theories as to why? 

Also, do you have any stats on population growth for the last year or two?

one thing I see is in these bigger cities in the mid west much of the urban core is more renter dominated than other urban cores.

and landlords are doing a better job with their work so you don't see as many failed landlords or burnt out landlords as in the past. 

so that inventory is not hitting the market 

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  • Taylor Chiu
    Real Estate Agent · Salt Lake City, UT · Member since 2014 · 473 posts · 230 votes
    7y

    @Marcus Auerbach Thank you for posting this! Interesting that inventory is down so much, despite high demand. Have any theories as to why? 

    Also, do you have any stats on population growth for the last year or two?

    0Reply
  • Account Closed
    Rental Property Investor · Belgium, WI · Member since 2015 · 53 posts · 54 votes
    7y

    I've been following your thoughts on this subject.

    Do you see a potential for drop in demand? I read somewhere unemployment is projected to rise a few points nationally, and GDP growth slowing. 

    Inventory may not rise but I see potential pressure on the demand.

    This is a hard subject to follow because every article I read has different data and there doesn't seem to be a clear consensus

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Taylor Chiu:

    @Marcus Auerbach Thank you for posting this! Interesting that inventory is down so much, despite high demand. Have any theories as to why? 

    Also, do you have any stats on population growth for the last year or two?

    one thing I see is in these bigger cities in the mid west much of the urban core is more renter dominated than other urban cores.

    and landlords are doing a better job with their work so you don't see as many failed landlords or burnt out landlords as in the past. 

    so that inventory is not hitting the market 

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  • Pete Woelfel
    Milwaukee, WI · Member since 2017 · 138 posts · 69 votes
    7y

    Thanks @Marcus Auerbach - always appreciate your perspective on this!

    1Reply
  • Taylor Chiu
    Real Estate Agent · Salt Lake City, UT · Member since 2014 · 473 posts · 230 votes
    7y

    @Jay Hinrichs - definitely agree on the higher rental market volume. Hoping that people keep selling though - I could use some more properties!

    0Reply
  • Marcus Auerbach
    OP
    Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    7y
    Originally posted by @Taylor Chiu:

    @Marcus Auerbach Thank you for posting this! Interesting that inventory is down so much, despite high demand. Have any theories as to why? 

    Also, do you have any stats on population growth for the last year or two?

    Population growth for Milwaukee is usually misrepresented, because the city is almost 100% built out and the growth happens in the surrounding counties. Unemployment is perhaps a better measure for me; and in particular the source of the employment. Cities that grow fast often do so because of one major employer or industry. The weather is sometimes a reason for southern cities, not for MKE. And fresh water (Lake Michigan) is a favorite reason for me, but not yet a major factor except Foxconn. If you check on USA.com you'll see that population in Milwaukee is flat, but all of the surrounding counties have been growing slow but steady.

    3Reply
  • Marcus Auerbach
    OP
    Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    7y
    Originally posted by @Jay Hinrichs:
    Originally posted by @Taylor Chiu:

    @Marcus Auerbach Thank you for posting this! Interesting that inventory is down so much, despite high demand. Have any theories as to why? 

    Also, do you have any stats on population growth for the last year or two?

    one thing I see is in these bigger cities in the mid west much of the urban core is more renter dominated than other urban cores.

    and landlords are doing a better job with their work so you don't see as many failed landlords or burnt out landlords as in the past. 

    so that inventory is not hitting the market 

     Jay that is certainly the case for Milwaukee, landlords are more educated, probably also because of the good work people do on BP and locally, the Brew City - full credit to @Rebecca Knox What puzzles me is that I see the same hesitation in the wealthy suburbs, 350k and up. Gary Keller has been talking about "buyer's fatigue" - people getting tired of chasing after the market or are worried if they sell their house, will they find a suitable upgrade? I am also seeing stats that people are not moving much. I have read in the Remodeling Magazine that the remodeling market which has grown without a break the last 10 years is now on it's highest level - ever. So, people tend to stay more and fix up their house. Or people are just skeptical. On the stock market that would be a good thing, as long as people are concerned the market can rise, when euphoria hits and your granny buys stocks.. sell!

    0Reply
  • Marcus Auerbach
    OP
    Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    7y
    Originally posted by @Account Closed:

    I've been following your thoughts on this subject.

    Do you see a potential for drop in demand? I read somewhere unemployment is projected to rise a few points nationally, and GDP growth slowing. 

    Inventory may not rise but I see potential pressure on the demand.

    This is a hard subject to follow because every article I read has different data and there doesn't seem to be a clear consensus

    Unemployment is never good, but the demand is driven by just time. 10 years ago they started dating and lived in an apartment, today they need a house. Or they had one, now they want a bigger one, because they have 3 growing boys. The issue is that we stopped supply production in 2008 - and then did build only a few houses for almost a decade - now builders are back, but just enough to maintain the current levels, not enough to fill the void.

    And you can't build in MKE below 350k; I have tried. That's the starter home and the n first upgrade. We are locked in here. The only relief I can see would be through opportunity zone developments and a shift to condos.

    3Reply
  • Account Closed
    Rental Property Investor · Belgium, WI · Member since 2015 · 53 posts · 54 votes
    7y

    In my town in ozaukee county we have new builds for +/- $220,000 that are smaller sq/ft and "green homes" but even that seems like a stretch for our median household income of $67,xxx. 

    Does ozaukee fall into greater milwaukee growth? 

    I hope I dont detract from your thread and I appreciate your knowledge and experience. I just feel like any hit to employment or income would be really bad. Where would that come from, idk, but I'm trying to learn

    Granny's not buying stocks yet! But my younger brother did get a 0 down loan...

    1Reply
  • Account Closed
    Investor · Milwaukee, WI · Member since 2013 · 1k+ posts · 1k+ votes
    7y

    People don't move to Milwaukee. People move around Milwaukee. Now if the water supply on the planet ever becomes a factor, Milwaukee will be the prime real estate on the planet.

    I don't see prices falling either. The only stat I back that up with is how fast they fly off the shelf - it's nuts.

    Good to see you on here Marcus. I still have your market drawing in my workfile - I named it the Marcus Market - lol. It was spot on too.

    3Reply
  • William S.
    Rental Property Investor · Overland Park, KS · Member since 2015 · 492 posts · 234 votes
    7y

    As a former renter/home buyer/investor in Milwaukee I have a few things to add.

    • It is very difficult to find quality rentals in Milwaukee (as a renter). The "standard" is very low in Milwaukee compared to other areas. Milwaukee also isn't very dog friendly which narrows things even more. Quality rentals are very high considering the income levels.
    • Because of the lake/not much land/crime you essentially have to find a little pocket within a specific neighborhood. Not many options to choose from. The result is a lot of competition. Houses do not stay on the market very long at all!

    The weather is brutal though!!! I can see people moving there from other rust belt states who are used to it, but if you didn't grow up in that weather I doubt you'd last long...

    1Reply
  • Marcus Auerbach
    OP
    Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    7y
    Originally posted by @Account Closed:

    In my town in ozaukee county we have new builds for +/- $220,000 that are smaller sq/ft and "green homes" but even that seems like a stretch for our median household income of $67,xxx. 

    Does ozaukee fall into greater milwaukee growth? 

    I hope I dont detract from your thread and I appreciate your knowledge and experience. I just feel like any hit to employment or income would be really bad. Where would that come from, idk, but I'm trying to learn

    Granny's not buying stocks yet! But my younger brother did get a 0 down loan...

    Well, if you look at it on a national average it takes a person 77 months with a median income of 52k to save up the 20% down payment for a median home (216k). Northern Ozaukee Co is not far from that median. And if you use a 5% down loan or 3.5% FHA for your first home, you need only a fraction of that time.

    In Pittsburgh, Cleaveland, Detroid etc about 4 years. In NY, Miami etc about 10-11 years and in San Francisco, you probably guessed it 31 years. So basically if you are not a Crazy Rich Asian or have a house to sell in the bay area good luck saving up!

    Chances are the next down swing will be much softer than the last one; however most savy landlords have done just fine during those 2009-2012 years and I would not mind to see a market like that again in my life time and be able to take advantage of discounted opportunities!  

    4Reply
  • Taylor Chiu
    Real Estate Agent · Salt Lake City, UT · Member since 2014 · 473 posts · 230 votes
    7y
    Originally posted by @Marcus Auerbach:
    Originally posted by @Taylor Chiu:

    @Marcus Auerbach Thank you for posting this! Interesting that inventory is down so much, despite high demand. Have any theories as to why? 

    Also, do you have any stats on population growth for the last year or two?

    Population growth for Milwaukee is usually misrepresented, because the city is almost 100% built out and the growth happens in the surrounding counties. Unemployment is perhaps a better measure for me; and in particular the source of the employment. Cities that grow fast often do so because of one major employer or industry. The weather is sometimes a reason for southern cities, not for MKE. And fresh water (Lake Michigan) is a favorite reason for me, but not yet a major factor except Foxconn. If you check on USA.com you'll see that population in Milwaukee is flat, but all of the surrounding counties have been growing slow but steady.

     Thanks for the reply, I'd always wondered about the flat / slightly declining population stats, and what you are saying makes a lot of sense. I'll start tracking those surounding counties!

    0Reply
  • Taylor Chiu
    Real Estate Agent · Salt Lake City, UT · Member since 2014 · 473 posts · 230 votes
    7y
    Originally posted by @Account Closed:

    People don't move to Milwaukee. People move around Milwaukee. Now if the water supply on the planet ever becomes a factor, Milwaukee will be the prime real estate on the planet.

    I don't see prices falling either. The only stat I back that up with is how fast they fly off the shelf - it's nuts.

    Good to see you on here Marcus. I still have your market drawing in my workfile - I named it the Marcus Market - lol. It was spot on too.

     When you say they move "around" Milwaukee, do you just mean that people already living in Milwaukee switch houses/neighborhoods? Or do you mean that people from other cities move in to the suburbs / surrounding counties?

    0Reply
  • Account Closed
    Rental Property Investor · Belgium, WI · Member since 2015 · 53 posts · 54 votes
    7y

    @marcus Auerbach

    I think you're probably right. I'll put away my tinfoil hat for now haha

    1Reply
  • Jack Medford
    Investor · Nipomo, CA · Member since 2014 · 366 posts · 401 votes
    7y

    @Taylor ChiuI can't speak for Merritt, but as someone considering a "move to Milwaukee" my sights are focused on the surrounding suburbs. There are certain neighborhoods within Milwaukee that I'm considering, but the suburbs have more appeal. I think this is what Merritt was talking about. 

    @Marcus Auerbach amazing work as always with your analysis! I have a question though about one statement you made in your comments. 

    "And you can't build in MKE below 350k; I have tried."

    Is there something about the Milwaukee market that keeps this number so high? I've heard much lower numbers elsewhere in the country, which leads me to think there is something special about Milwaukee. 

    1Reply
  • Account Closed
    Investor · Milwaukee, WI · Member since 2013 · 1k+ posts · 1k+ votes
    7y
    Originally posted by @Taylor Chiu:
    Originally posted by @Account Closed:

    People don't move to Milwaukee. People move around Milwaukee. Now if the water supply on the planet ever becomes a factor, Milwaukee will be the prime real estate on the planet.

    I don't see prices falling either. The only stat I back that up with is how fast they fly off the shelf - it's nuts.

    Good to see you on here Marcus. I still have your market drawing in my workfile - I named it the Marcus Market - lol. It was spot on too.

     When you say they move "around" Milwaukee, do you just mean that people already living in Milwaukee switch houses/neighborhoods? Or do you mean that people from other cities move in to the suburbs / surrounding counties?

     As my old teacher Mr Parker would say when we asked him a this or that question, the answer is yes - lol.

    In this case when I said Milwaukee, I meant the metro.

    1Reply
  • Marcus Auerbach
    OP
    Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    7y
    Originally posted by @Taylor Chiu:
    Originally posted by @Marcus Auerbach:
    Originally posted by @Taylor Chiu:

    @Marcus Auerbach Thank you for posting this! Interesting that inventory is down so much, despite high demand. Have any theories as to why? 

    Also, do you have any stats on population growth for the last year or two?

    Population growth for Milwaukee is usually misrepresented, because the city is almost 100% built out and the growth happens in the surrounding counties. Unemployment is perhaps a better measure for me; and in particular the source of the employment. Cities that grow fast often do so because of one major employer or industry. The weather is sometimes a reason for southern cities, not for MKE. And fresh water (Lake Michigan) is a favorite reason for me, but not yet a major factor except Foxconn. If you check on USA.com you'll see that population in Milwaukee is flat, but all of the surrounding counties have been growing slow but steady.

     Thanks for the reply, I'd always wondered about the flat / slightly declining population stats, and what you are saying makes a lot of sense. I'll start tracking those surounding counties!

     Waukesha Co is growing the fastest; Brookfield. Also new Berlin. Then Racine, Ozaukee and Washington. All counties have a Milwaukee Metro-ish part and a part that's more rural (favorite word with my accent lol).

    2Reply
  • Marcus Auerbach
    OP
    Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    7y
    Originally posted by @Jack Medford:

    @Taylor ChiuI can't speak for Merritt, but as someone considering a "move to Milwaukee" my sights are focused on the surrounding suburbs. There are certain neighborhoods within Milwaukee that I'm considering, but the suburbs have more appeal. I think this is what Merritt was talking about. 

    @Marcus Auerbach amazing work as always with your analysis! I have a question though about one statement you made in your comments. 

    "And you can't build in MKE below 350k; I have tried."

    Is there something about the Milwaukee market that keeps this number so high? I've heard much lower numbers elsewhere in the country, which leads me to think there is something special about Milwaukee. 

    It's basically land + materials + labor and all three are more or less impacted by the location. Labor is a bit higher in Milwaukee than it is somewhere in the boonies. Lot's a very cheap in most parts of the city, under 30k. But nobody wants to build there, the house would not appraise. In the suburbs any quality lot will go for over 120k, if nice 150k and up. Typically a lot will be about 20% of a total build package. If you run a search on MLS for new construction you see that the bulk is 450k to 650k. Another way of looking at this is when you talk to builders about cost per sqft (which is BS) the numbers you get will be $150-200 pes sqft plus land. If you go more rural you can get a good lot for under 50k and your labor cost goes down, you can probably build for under 300k.

    2Reply
  • Jack Medford
    Investor · Nipomo, CA · Member since 2014 · 366 posts · 401 votes
    7y

    @Marcus Auerbach Thanks for the reply! That makes a lot of sense. I wasn't thinking about cost of acquiring the lot, just the construction part. 

    0Reply
  • Stuart Grazier
    Investor · Parker, CO · Member since 2016 · 550 posts · 389 votes
    7y

    @Marcus Auerbach great info! Thanks for the perspective on population growth. I've read a lot about people and businesses leaving Chicago and moving to Milwaukee. Are you seeing that in any of your research?

    0Reply
  • Marcus Auerbach
    OP
    Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    7y
    Originally posted by @Stuart Grazier:

    @Marcus Auerbach great info! Thanks for the perspective on population growth. I've read a lot about people and businesses leaving Chicago and moving to Milwaukee. Are you seeing that in any of your research?

    I don't know how many are moving to Milwaukee propper, but I drive to Chicago Ohare airport all the time and the corridor is filling up visibly, right past the State line into Wisconsin. And every time I drive I spot a few new constructions sites popping up, and that's just what I see from the freeway. So there is a whole lot more happening in that area other than Foxconn. The area itself has not much to offer, so if you want some sort of a life, you might want to choose to live downtown Milwaukee and drive 30 minutes to work ;-) 

    0Reply
  • Stuart Grazier
    Investor · Parker, CO · Member since 2016 · 550 posts · 389 votes
    7y

    @Marcus Auerbach great news for Milwaukee investors! What area of the city/suburbs do you see the most growth and new development? Down near Racine? 

    1Reply
  • Shawn AckermanPro Member
    Real Estate Entrepreneur · Mid West, East Coast · Member since 2015 · 3k+ posts · 1k+ votes
    7y

    @Marcus Auerbach Great information my friend.  Men lie/Woman lie but the numbers don't.

    0Reply
  • Marcus Auerbach
    OP
    Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    7y
    Originally posted by @Stuart Grazier:

    @Marcus Auerbach great news for Milwaukee investors! What area of the city/suburbs do you see the most growth and new development? Down near Racine? 

    Milwaukee is not a typical growth play compared to let's say San Antonio. Racine get's a lot of attention because of Foxconn, but a lot of money has already been made there and I am not a huge fan of most of the existing housing stock in that area. In terms of economic growth you see a lot going on downtown and also in the suburbs. But that's mostly new construction, the best opportunities are median priced properties. We have a good stupply of low end rentals and a very good supply of brand new 5 star appartment developments with fantastic on site anemnities $$$$$ rents. What is undersupplied are nice properties with good size and updated finishes. Generally we don't have enough inventory, buy or rent, as you can see from the numbers above. The issue is that new construction starts at 450k and thats too high for investors and most first time home buyers.

    1Reply
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