When it comes to analyzing the nation’s real estate prices, Milwaukee barely exists. The blue book for the industry is the, ahem, S&P/Case-Shiller Home Price Indices, whose clunky name belies how it revolutionized home value analysis. Created in the 1980s and a favorite source for the media, the report uses a complicated formula measuring repeat sales of homes over time in 20 of the largest U.S. metro areas.
But alas, Milwaukee has never made the 20-city cut. Co-author Karl Case suggests Milwaukeeans consult the Chicago information: “Milwaukee certainly does the same thing that Chicago does.” But Mike Ruzicka, president of the Greater Milwaukee Association of Realtors, bristles at the suggestion. “Our market is very different than most markets around the country.”
Ruzicka complains that the S&P/Case-Shiller information gets a lot of play in the local media, though stories rarely note Milwaukee is not among the cities surveyed. “It’s like looking at the national weather,” he says. “That’s really interesting, but what does it mean to me?”
Far more relevant to Milwaukee is another report done by Case (a professor at Wellesley College) and Robert Shiller (a professor at Yale University): their often-glossed-over but quite interesting homebuyer survey. Since its creation in 1988, this survey has consistently included responses from Los Angeles, San Francisco, Boston and Milwaukee, an unlikely grouping of cities. But there is a rationale behind the selections.
In 1988, the California real estate market was in a frenzy. “If you’re interested in psychology, you like frenzies,” Case says. So Case and Shiller chose L.A. and San Fran as hot (activity-wise, not temperature-wise) cities. Boston was cold, so it provided a contrast, but that left their research model with a vacant fourth slot.
Around the same time, Case traveled to Milwaukee and noted its unfrenzied stability. “We needed a market that was in-between both figuratively and literally, so we chose Milwaukee,” he says. “It seemed like a good, solid Midwestern city.” Since 1988, they’ve done the study eight times.
Ironically, for a stable Midwestern city, local homebuyers’ responses are often at the extremes. According to the 2009 results, 47 percent of Milwaukee homebuyers view investment potential as a major consideration when buying a home, the highest percentage among the four cities. Eighteen percent (also the highest) say buying a home is high-risk.
But Milwaukeeans have opted for ways to reduce the risk: Only 1 percent (lowest among the four cities) chose adjustable rate mortgages, while 9 percent (the highest) had no mortgage at all.
When it comes to home prices, Milwaukeeans are pessimists: 72 percent (the lowest) believe prices will increase in the next few years; 40 percent (the highest) fear prices will drop further in the next 12 months. Yet, 87 percent believe it’s a good time to buy because prices will rise. “They contradict themselves a bit,” Case says of Milwaukeeans. “They say prices are falling, but it’s a good time to buy.”
It’s no surprise Milwaukee residents are puzzled by the market. But the extent to which they celebrate smart, calculated decisions with a dose of skepticism shines through. When asked to agree or disagree with the statement, “Housing prices are booming. Unless I buy now, I won’t be able to afford a home later,” 91 percent disagreed, the highest of the four cities. Perhaps they realize their market is more stable and less likely to boom and bust.If you’d like to contribute, here’s a tip: If a letter arrives from Yale, it might mean that America’s foremost real estate analysts want your opinion. Last year, half of Milwaukeeans tossed the survey, thinking it was junk mail. So next year, folks, mail in the card.
