Alan Fankhauser moved here to take a job with Harley-Davidson a year ago, and then waited to buy a home. When he started looking last fall, sellers weren’t budging on prices, he says.
Not any longer.
Fankhauser recently began looking in earnest with the help of Heddy Humcke, a relocation specialist and buyer agent for First Weber. Fankhauser soon found a new condo in Brookfield he’d dismissed a year earlier as too expensive. The price had fallen $30,000, about 10 percent. The builder was also willing to relocate a fireplace, give Fankhauser his preferred appliances, hardware and doors, and waive one year of condo fees – a savings of another $10,000. Fankhauser signed on the dotted line.
Did he buy at just the right time? Metro home prices have dropped an average of 10 percent since the market peaked in 2005, and since prices here never enjoyed the irrational exuberance of places like Florida, many believe the local market has hit bottom. Others say prices could still drop further.
“The whole thing is, we don’t know where the bottom is, and we won’t know until we start coming out of it,” says Jim Barth, assistant vice president and sales director for Shorewest Realtors’ Mequon office.
In 2000, “It wasn’t uncommon in a very desirable area like Wauwatosa for a property to come on the market at $230,000 and, within hours, have offers over asking price,” says Scott Bush, vice president of operations for the Greater Milwaukee Association of Realtors. “In 2003 or 2004, it would have been worth $250,000 or $260,000. Now, that house would probably be worth $240,000.”
In 2000, homes averaged 30 to 60 days on the market before they sold; now it’s double or triple that. “You’re gambling if you wait,” says Bush, who believes the average time before sale could begin declining.
Humcke says sellers haven’t just been lowering their asking prices. Some have taken their homes off the market and made them rental properties. This latter trend, she adds, is another sign the market has hit bottom.
“What buyers are [asking now] is, ‘Are prices starting to go up again?’ ” says Dr. David Clark, chair of the Marquette University economics department and consultant to the Wisconsin Realtors Association. To answer this, he suggests buyers consider three measures over a period of two to three sales quarters: changes in the number of days on the market, median prices and sales volume. After the market hits bottom, the days on the market will begin to drop while median prices and the number of sales will start to rise.
With the exception of the second quarter of this year, Clark says, “We have not seen any significant reduction in median prices, and that one may be related to the long winter.” But, he says, “We see evidence now that median prices are starting to inch upward. That’s an indication the market isn’t going to weaken further.”
But University of Wisconsin-Madison real estate assistant professor Morris Davis isn’t so sure. “There’s no reason to rush into a purchase,” he says, predicting some softening in prices before they level off in 2010. But not in all cases. “I have enough anecdotal evidence that homes in the most desirable locations, close to Downtown, not condos, and in a viable location are holding firm,” he says.
The likely place for further price declines, Davis adds, is in the outermost suburbs, where high gas prices have reduced the attractiveness of homes for commuters.
Home Shopping Tips
Where to Buy: It’s the location, baby. “You’re better off buying a wreck of a house in a great area than the Taj Mahal in an area that is not good,” says Jim Barth of Shorewest/Mequon.
What to Buy: Even in a good location, you’re better off buying a well-kept home. “Find a home that’s been cared for, not a home that needs love,” says Heddy Humcke of First Weber.
When to Buy: Typically, spring offers the most inventory, Humcke says. “You also have the benefit of seeing the landscape and exterior of a home.”
Negotiate: Buyers are definitely in the driver’s seat right now. Know what you want and stick to your guns. Do your homework.
Good credit counts: “It used to be you could quote a rate, and it was the same across the board,” says Christine Turowski, assistant vice president of Priority Mortgage Corp. “Now, a rate is as unique as your credit score.” Example: At press time, a 30-year, $250,000 fixed-rate mortgage had a rate of 5.75 percent with a credit score of 740. At 660, it jumped to 6.125.
Save up for a down payment: Zero-down programs have pretty much disappeared, and 80-20 mortgages (with an 80 percent first and 20 percent second mortgage) have vanished, even for people with good credit.
