Dane County/Madison area, WI Real Estate

7 Replies

Hey BP,

Thought I would start a forum to hear what people are seeing and hearing in the greater Madison, Wi area in Dane County. Below are some of my thoughts and observations.

Construction continues for both single family and many multi family projects who were entitled before the pandemic. Lumber is still high. Drywall is being allocated because costs increases are coming next year and manufactures don’t want vendors stockpiling. Insulation is on backorder. A slow entitlement process just got slower.

Interest rates are still low and we still have more buyers than inventory. Veridian is the only construction company touching affordability on new construction, but they build 4/5 homes in the county and are vertically integrated which helps immensely!

During the pandemic we saw our MF portfolio vacancy rates double from 1% to 2% on 1500 market rate West Madison-ish units, and we are having strong lease up on a new construction project coming on line in the Spring.

We have 2 units remaining on a 9 unit condo we developed in Middleton School District that first got occupancy 5/1-early pandemic (Bearclawtownhomes.com). Both remaining units are townhome style 2BR/2.5BA 1500SF for $350k+.

What are you looking for that you can’t find? What are you seeing? What can I do to help?


Thanks for sharing what you're seeing! Curious to hear your what your expectations for inventory are this coming year. I was expecting more inventory in 2020, but then COVID hit and we saw an overall decrease. I've been thinking 2021 might bring an explosion of inventory as sellers who held off in 2020 might jump back in. 

As far as what I'm seeing... Here's a few charts/figures from my latest Q3 report on Dane County.

Surging demand leaves us with the lowest SF inventory levels in history. Listings are doing their best to keep up. 27.6% year over year increase in Accepted Offers makes it tough, though. 

Here's the reason for my personal expectations with inventory...

We appear to be rounding off the bottom of our inventory range. It may be that we head lower on inventory and ever higher with prices, but seems like it has to stop at some point. 

Let me know if you'd like the full report. I break down the 6 sections of the county: West Metro Madison, East Metro Madison, Dane North East, Dane North West, Dane South West, and Dane South East. 

Andy, good stuff. When do you think relief is coming on lumber prices? Jack, I think it'll be a strong seller's market again in 2021. Too many buyers and too much ground to make up on listings.

@Brian Conne  I don’t have a crystal ball on the lumber or construction prices in general but I hope in the next 6 months. I think it’s probable that there is less non multi-family/commercial construction which if true should soften construction costs as a whole by less demand for materials. However locally here I know there we’re a few large housing project which were delayed to 21 because of the Vid and put a few more projects in the pipeline. That’s probably just a blip in the radar and hopefully the supply chain is healthier this year.

@Jack Medford it’s hard to see supply ever catching up with demand in Madison metro due to entitlement constraints, high employment, and lack of raw dirt due to environmental aspects. 

What are you guys seeing or hearing about Janesville? I know of another large developer who is focusing some energy there and seeing some real positive traction and strong absorption on high end multi family absorption. 

So it’s early in the day but I propose a toast to ‘22. May our health care workers get a long needed rest, may sticks cost less to put in our nest. May restaurants and bars frequented again, and a vaccine delivered from the eggs of a hen. May hotels and small business get back on their feet, and may all people everywhere have something to eat!

All Thanks for sharing your experiences and stats in Dane County and the Madison area. It's been an interesting and hard to predict year for sure. Spring started slow, but then July-Oct has been the strongest ever in terms of number of sales.  I'm looking back through our sales data for this year and there's only 5 out of 70 sales that were active for more than 3 weeks (excluding vacant lots). Based on the days on market I think 2021 will remain a sellers market.

It does seem like inventory is rounding the corner, looking at the Madison area in all price ranges. I think this will help calm things a little (in comparison to the 2019-2020 markets). However, I think the lower priced houses around Madison (under $325,000) will continue to be extremely competitive. There just seems to be a huge entry level demand, but no good inventory in the lower price ranges. I personally just bought a single family home in Verona under 300k as a rental, because I think that inventory will get more scarce. 

If someone could find a way to make a decent profit on affordable entry level homes I think they would make a killing. Construction costs have gotten too high to make this possible though. This does make me wonder if condo conversions will come back? There's been lots of multi-family housing built in the last few years, but none of the old multi-family inventory (that I've noticed) has converted to condos to create affordable units. Maybe it's a function of lending being a pain on units like that.

Similarly, as more higher end apartments are built, I think there's demand for affordable rentals as well. I posted a small dated 2 bedroom half duplex for rent for $1075 and had over 90 inquiries. 

In any case, I've rambled enough. Happy Thanksgiving everyone! I hope you all find a way to make 2021 another stellar year!


@Brian Conne and @Andy Crooks . To clarify, I don't expect 2021 to be a buyer's market. Just that I expect the rounding off of inventory to continue. Even with COVID we've yet to see inventory hit the low it hit in 2017. The soonest I'd expect the market to shift is 2023. That is based on the previous market cycle data, where inventory began jumping in 2004, well ahead of the 2007/2008 crash. 

"it’s hard to see supply ever catching up with demand in Madison metro"

Famous last words. ;) Remember how confident everyone was in the narrative "housing always goes up" before 2007? It may take a few years and the catalyst may not be obvious at the time, but at some point, this market will flip.

@Jack Medford the last recession was in large part created by crap mortgages setting people up to fail. Obviously there are many facets and layers to any economy and while RE is hyper local there are many macro forces at play. And yes it's also historically cyclical every 18 years or so.

I don’t have hard data on this (id love to see it) but it didn’t seem that Madison got hit as hard or stayed down as long as many other places in the last recession. The comment about supply not catching up to demand was as much about the restrictive and lengthy entitlement process as it was about the diverse and robust employers in the area in a variety of sectors. I also didn’t say it will never be a buyers market but it’s tough to predict what might cause it. But then again I haven’t spoken to too many people who had a pandemic contingency plan...

Dane Co has widely surpassed their own growth projections over the last decade. One local issue that may stifle growth in medium term is infrastructure inability to handle the transit (think Beltline). But maybe that just leads to more people wanting to live closer to work...

@Keith Schulz as it relates to condo conversion, sure you can get more per door on a conversion, but I still see more risk than reward especially in a larger building. For one over half of the units would need to be under contract or sold for buyers to get conventional financing which makes selling tough because entry price points probably need or at least want want. 

Money is also cheap and cap rates are getting compressed from big city money buying the larger existing projects that one could likely refi and pull out cash close to the profit difference on a conversion. 

Also Fannie and Freddie want majority owner occupied on these projects which all but eliminates investor buyers. 

I personally like a conversion on a smaller project to eliminate the absorption risk but then again you gotta get a bank on board and also get the units for the right price which is hard in the first place.

my turn to stop rambling. Happy turkey day