Slow down? What slow down?

Residential real estate markets explode in the face of market woes
It’s the middle of summer, but vacations are not an option for people working in the Shorewest closing department. The same holds true for Shorewest subsidiary, Wisconsin Mortgage Corp., where low interest rates have pushed literally thousands of people into the market looking to refinance or trade up to bigger homes.
The numbers are staggering. Shorewest, Wisconsin’s largest residential real estate company, has set company records in every month of this year and is on pace to shatter its annual sales record — set just last year. In the month of June alone, the company established a new monthly record for closed sales with $201 million on 1,211 units, or families, serviced.
Last year, Shorewest’s sales were $1.494 billion, and through the first six months of 2001, the company closed 125 more units than in 2000. The company closed $761 million through June 2001 versus $711 million through June 2000, according to Don Horning, company president. Wisconsin Mortgage closed 88% (896 mortgages in 2001 vs. 477 in 2000) more loans over the same six-month period.
“That’s a direct reflection of interest rates,” Horning says.
But Horning sees more to the residential real estate boom than simply interest rates. In fact, the rise in residential real estate has been going on over the past two decades.
“I think housing has become a good investment,” he says. “There are a lot of young people earning very good salaries, and what’s the first thing they do? They say, ‘I can only invest so much in stock,’ so the next question is, ‘Where am I going to live?’ So this has been fueled a lot with young people, and there are young people buying homes at a much younger age.”
He also noted that single women are buying their own homes, which was “unheard of 10 or 15 years ago.”
The other side of residential real estate is constructing new homes, which has also been strong in 2001.
“Generally, the market has stayed very strong for our members,” said Heidi Heilert, assistant executive director of the Metropolitan Builders Association. “They really haven’t seen a dip compared to last year. It was kind of an anomaly in the overall economic forecast that housing has stayed strong. We still have a lot of members saying they can’t even take on more work if they wanted to right now.”
Heilert agrees with Horning’s assessment that interest rates have spurred sales and that people view housing as a safe, secure investment that appreciates over time.
And people are now building homes with the thought of staying in them for longer periods of time, which maximizes their return. Along with increased focus on energy-efficient materials, people are starting to use flexible designs so they have the ability to change the usage of the room over time to accommodate lifestyle or family changes. For instance, a flex design could allow the transformation of a child’s bedroom into a home office or study once the child moves away, or having great rooms that can be used for both formal and informal settings.
“The goal there is that you can continue to grow within your home instead of having to move into a new home,” Heilert says.
Heilert says the MBA membership is confident that new home building in 2001 will maintain a steady level.
“Right now, they’re optimistic about it,” Heilert says. “They feel very confident in the market for home building at this time. I don’t see any huge red flags on the horizon right now.”
July 20, 2001 Small Business Times, Milwaukee