BUILDING BOOM
New construction up 40% for Wisconsin’s hot housing market
The market for existing homes across Wisconsin is hot, with properties selling for tens of thousands of dollars over their asking price, often only hours after being put up for sale.
That hot housing trend has also taken hold in Wisconsin’s new home construction market.
Nearly 2,000 more new home permits in Wisconsin were pulled in the first half of 2021 compared with last year, according to data compiled by the Wisconsin Builders Association. That’s an increase of almost 40% statewide.
“The lack and competition of existing housing combined with low interest rates continue to play a huge role in the demand for new housing,” said Brad Boycks, Wisconsin Builders Association executive director.
More than 7,000 permits were pulled in the first six months of this year, according to WBA data. In 2020, 5,074 permits were pulled in the same time frame. That was on par with 2019 numbers.
COVID-19 and a ‘baffling’ market
This isn’t just a backlog of projects that were put on hold during the beginning of the COVID-19 pandemic. This is part of a continuing increase in the number of homes being built in the state. The number of new homes built has grown over the last decade after the fallout from the 2008 housing and financial crisis.
“This is probably the strongest market in a crazy world,” said John Stoker president of Victory Homes of Wisconsin. “This is the strongest market in my 22 years (in business). The psychology behind it is baffling to me.
“You have a global pandemic, higher pricing and we’re as busy as we’ve ever been. Go figure.”
Lumber prices and the cost of other raw materials are up. Supply chains are still disrupted by the pandemic. Cabinets and other home essentials are taking twice as long to get to builders. The construction of a new home is taking months longer than it did a couple of years ago. Yet, people still want to build.
“The last 18 months have tested our patience,” Stoker said. “It is frustrating. It costs me money when it takes longer. It costs the customer more. It saves them money if I build faster. But, frankly, I would say the vast majority of our customers have been very patient and understanding.”
The Germantown-based home builder will build 70 to 75 homes this year, up from other recent years when Victory Homes built about 60 homes, Stoker said. He plans to grow his team from 25 to 29 employees by the end of the year because of increased demand.
People call Victory Homes every day,
Stoker said, offering tens of thousands of dollars above the asking price to buy one of the company’s completed model homes.
Inflation hits construction materials
While low inventory and bidding wars are driving up prices of existing real estate, new construction is feeling an increased cost of materials.
David Belman, president of Belman Homes in Waukesha, got a bid for a 2,400 square-foot home last fall. The lumber would be $70,000. In March, Belman was quoted $107,000 for the same project. The prices have fallen from their peak. In July, Belman’s cost was $97,000.
“Prices are dropping. It’s just not dropping that quick,” Belman said.
The demand for new housing stock is increasing as the supply of existing homes on the market remains limited.
The market has had a long-term inventory shortage.
Many home building businesses are turning down work.
Linda Machmeier, owner of Signature Homes in Eau Claire, said this is the most demand she’s seen in more than 20 years in the business.
“I couldn’t look at a new home project until fall of 2022,” she said.
New housing permits in Eau Claire County are up 281% in the first six months of the year, according to WBA. That’s one of the largest increases in the state. Nearly 250 permits were pulled from January through June this year. In 2020, just 64 permits were pulled in the same time frame.
“It’s going to be a hard push to finish all these projects we’re starting,” Machmeier said.
Buying ‘exactly what they want’
The competitive market for existing homes is making building a new home more attractive.
Sales of existing homes were up 8.4% statewide through the first half of 2021, according to the Wisconsin Realtor’s Association. The median price of a home is up 11.9% to $235.000.
“People are getting top dollar for their houses and it’s encouraging them to buy new and buy exactly what they want,” said Carl Tomich, president and CEO of Westridge Builders, Inc., in Waukesha.
Tomich said his business will nearly double this year. Westridge typically builds about 20 homes a year. In 2021, Westridge will build nearly 40. It’s the best year the company has had since the housing crash. Westridge has grown its office staff from 10 to 13 in the last two months.
“It’s hard to pass up business when it’s right there,” Tomich said. “We could sell more than we have. We put the brakes on it to make sure that we don’t get too far ahead of ourselves.”