No quick fix to home shortage
Expert says issue isn’t limited just to local market
An ongoing shortage of homes for sale in the metro areas of Wisconsin isn’t going to be resolved quickly, and mortgage rates could hit 5% within the next 18 months, an expert told a group of real estate professionals Monday.
The lack of houses and condominiums on the market is a national issue driven by multiple factors, said Mark Eppli, a Marquette University finance professor who is the Bell chair in real estate at the school’s College of Business Administration.
One factor is that as new families have formed, construction of new single-family houses has seriously lagged, Eppli told about 200 people gathered at the Italian Community Center for the annual Wisconsin Residential Real Estate Summit. Homebuilding peaked just before the market collapsed during the Great Recession, but since then, “we haven’t kept pace,” Eppli said at the event, which was conducted by the Wisconsin Realtors Association and other sponsors.
Also contributing to the lack of houses on the market is the fact that people aren’t moving as much as they used to. Eppli said from just after World War II until 1985, about 20% of Americans would move every year.
“After that point, it’s dwindled down to 11%,” Eppli said. “We’re not moving. And in particular, how we’re not moving is we’re not moving within our counties. If we’re not moving within our counties, we are aging in place.”
That means fewer houses are being listed for sale, leaving the inventory short of the demand, which now includes millennials who are starting to create households.
One hope is that homeowners might be more inclined to put their house on the market now that real estate prices have recovered and are back to where
they were in 2007 in most markets, Eppli said.
Still, he said, with home construction still occurring at a slow pace, a shortage of inventory will remain a problem.
“I don’t see this inventory concern going away quickly,” Eppli said.
With demand for housing driving up prices, rising mortgage rates could make affordability a tougher challenge for more potential buyers. But Eppli said he doesn’t think a huge jump in mortgage rates is coming.
Last week, the average rate in the United States for a 30-year fixed-rate mortgage was 4.33% with points of 0.6, according to mortgage buyer Freddie Mac.
“What we have here is the possibility of this interest rate really going to about 5% in the next year to 18 months,” Eppli said.
James Imhoff, chairman of First Weber Realtors in Madison — also a guest speaker at the summit — said he thinks mortgage rates could average 4.75% by the end of this year.
Imhoff said that amid the dearth of people listing their homes for sale, Realtors are contacting homeowners they know from past sales and are talking to them about selling.
“They go out and contact the sellers themselves,” Imhoff said. “They find sellers that don’t know they want to sell. That’s true. They identify sellers who’ve lived in their homes five, 10, 15, 20 years and talk to them about it — explain to them that they could move up and they could sell their home and generate a good profit on that home.”
Imhoff said that millennials now are in the market. He said that some are buying houses that are farther away from the metro employment centers of Wisconsin, which could be the start of a level of construction that would make a difference in the inventory of homes.