Low prices stimulate existing home sales around Milwaukee
Daily Reporter (Milwaukee), Aug 12, 2009 by Sean Ryan
Home sales finally are improving around Milwaukee, but the low prices that are attracting buyers make it difficult for builders to get a piece of the action.
Home sales increased almost 16 percent in July this year from the same month in 2008, said Bob Larson, office manager for First Weber Group, Waukesha. But very few new homes are selling, and people are paying less for existing homes, he said.
“It’s very tough, and if there’s any part of the market that’s hurting the most, it’s the new home construction,” Larson said. “The builders are all at a standstill, and they can’t support the prices.”
Prices have declined steadily for more than a year as real estate agents try to attract buyers, said Mike Ruzicka, president of the Greater Milwaukee Association of Realtors. But the increase in July sales could be a sign the Milwaukee-area market hit bottom and prices finally will hold steady, he said.
“We’ll definitely see a continuing trend where a majority of the purchases in the major metropolitan area will be in Milwaukee County,” Ruzicka said, “and they’ll be under $150,000.”
Increases in sales are creating opportunities for developers to build houses in case buyers come along, said J. Scott Mathie, government affairs director for the Metropolitan Builders Association. People who put their homes on the market are not sure how long the houses will take to sell, so they are not hiring contractors to build new homes, he said. But those same people want new houses quickly once their homes sell, he said, so buyers want builders to have empty, new houses at the ready.
Craig Caliendo, president of Kingsway Homes LLC, Elm Grove, said he is not confident enough to start building houses without buyers. He said Kingsway pulled back on building speculative houses in 2005.
“The market is still very tough,” he said, “and without a strong, consistent demand, you can end up sitting on a spec home for a while, and it’s certainly expensive to do that.”
Builders must pay property taxes and interest on construction bills for houses until they sell, Caliendo said, so the mounting prices of holding onto vacant houses quickly erode profits. The longer houses are for sale, the greater the temptation to slash prices to get buyers, he said.
“We want to see the demand side out there, and pretty consistently, before we jump back in,” he said.
Kaerek Homes Inc., West Allis, cut its prices on speculative houses as much as possible, said President Mike Kaerek. The sale prices of around $200,000 to $250,000 are more than 15 percent lower than they were two years ago, he said.
“We’ve been spec-ing right along, but it’s kind of hit and miss,” Kaerek said. “You might get a month where you sell two or three, and then you get a month where you don’t sell any.”
Kaerek is sticking to his longtime business plan of having 25 to 30 speculative houses in the inventory, he said, but the slower turnover means the company is holding onto houses longer and building fewer new ones, he said.
“Our volume is not what it used to be,” he said
waukesha real estate
