Angela Walters has a list of pre-approved buyers who can’t seem to find a home. This is a result of the outsized demand for homes versus the shallow inventory of listings.
Walters, a real estate broker with EXP Realty, recalls one recent incident. One of her buyers was interested in a Milwaukee-area home listed for $199,000. The first day of showings revealed how many others also had the same idea.
“There were cars lined up when I pulled in,” she said. “They just handed the keys from one agent to the next. The door just stayed open the whole time.”
She said her client offered $50,000 over the listing price. They were preapproved for $250,000, so they threw everything they had at the seller. Their offer still wasn’t selected.
“The (listing) agent told me they received 36 offers, and that there were 10 offers that were higher than ours,” Walters said.
This story is one of many being told by residential real estate agents in the metropolitan Milwaukee market right now.
Inventories of homes listed for sale have been tight for years, but the supply issue became a lot more visible earlier this year.
According to the Greater Milwaukee Association of Realtors, metro home sales were down 0.7% year-over-year in February. This was a departure from a gangbuster 2020, which set new records in home sales despite a short-lived slump in the spring due to the COVID-19 pandemic.
GMAR noted the slight dip in sales was due to the lack of inventory, not a decline in buyer interest.
Seasonally adjusted inventory, which estimates how long it would take all existing homes on the market to be sold given current demand, has not reached above 1.5 months for the past year. This measurement also subtracts the listings that are active with offers, since the vast majority of them turn into a sale. That’s well below the 6-month supply level that is considered a balanced market (anything less is considered a seller’s market and anything more a buyer’s market).
February’s inventory level stood even lower, at 0.6 months, a new low for the 12-month period.
“There aren’t really words to describe the pickle we’re in,” said Mike Ruzicka, president of GMAR. “It’s going to take a while to get out of this.”
Industry experts don’t expect the market to turn around anytime soon – especially not as temperatures warm and the market heads into what is normally its busiest time of year in the late spring and summer.
David Clark, an economics professor at Marquette University, recently predicted the inventory issue will cause statewide sales declines for the peak months of the home-buying season. This period runs roughly from May to August.
“Our problem is not a demand problem,” Clark said at a recent Marquette real estate event. “Our problem is not a macroeconomic problem. Our problem is a supply problem.”
This pickle has been fermenting for a long time. Ruzicka said the market hasn’t seen enough listings since 2015.
He said new construction hasn’t been keeping up with demand, and developers are also building too many apartments relative to condominium units. And as supply has lagged, household formation has been increasing, said Ruzicka. New households mean more demand for homes.
The pandemic has only exacerbated the issue in two distinct ways, he said. First, it pushed the market forward about three months because of that short lull at the onset of the pandemic, caused by statewide shutdowns and a general pause in economic activity. Second, it caused people to continue seeking homes well into the winter months, which are traditionally slow periods for the market.
“(The pandemic) really pulled any ability to try and mask the problem away. It’s really visible right now,” Ruzicka said. “It all comes down to creation of new (housing) units. We just need more units.”
Walters said buyers and their agents are getting creative to help their offers stand out.
On the other end, she is also challenged with convincing people to put their homes on the market.
“The biggest challenge is, ‘Where am I going to go?’” Walters recalled a recent would-be seller telling her.
Her response to him and others in that camp are that the market may not be this way forever.
“You want to buy low and sell high. This is definitely a high point,” she said.
