Are millennials, at long last, ready for that old-school American dream of owning a home? How is Milwaukee recovering from the Great Recession’s foreclosure crisis? And how the heck does Airbnb fit into things? Get the lowdown on all that and more in our wide-ranging look at the real estate landscape.
Written by Maggie Ginsberg, Erik Gunn, Claire Hanan, Matt Hrodey, Jonathan Powell, Rich Rovito, Daniel Simmons & Carolyn Kott Washburne | Photos by Adam Ryan Morris | Illustrations by Evan Hughes
Included in this cover story:
- New Kids on the Block
- What You’ll Get For…
- A Taxing Look at Property
- The Temporary Neighbors
- Home Numbers
- The Lake Effect
- An Architect’s Vision
- Unwinding the Foreclosure Crisis
- Searching for the Light at the End of the Tunnel
New Kids on the Block
Largely absent from the residential real estate market, millennials are finally poised to make an impact. By Maggie Ginsberg.By the time Adam Knudsen made the leap from renter to homebuyer in 2016, he was 31 – a decade older than his parents were when they first did the same. That was the natural progression for baby boomers back then: Get married, buy a home, build a family and grow the career. But Knudsen, who works in tech, and his partner, Phon Nguyen, had too much living to do before following in those boomer footsteps.
“We still wanted to go out, we still wanted to travel, we had student loans to pay off,” Knudsen says. “My parents were super-stretched thin just buying a house for our first family home. That’s all they focused on.”
Delaying marriage, homebuying and children (and owing big on student loans) are hallmarks of the millennial generation, broadly defined by the Pew Research Center as encompassing people born between 1980 and 2000.
“They’re such a savvy group, raised with technology,” says Judy Hearst, senior vice president and regional manager for Coldwell Banker’s Wisconsin Residential Brokerage. “Many of them have seen what their parents have gone through with housing in the past.”
But after a slow start, millennials are starting to have a large impact on the housing market – accounting for 32 percent of new homebuyers in 2015, according to the National Association of Realtors (NAR). And the Wisconsin Realtors Association reports that 2015 saw closings on existing homes increase 11.4 percent over 2014, with more homes sold than any year since 2005.
Although the housing crisis of the mid-to-late-2000s scared off many younger millennials, whose parents may have struggled with job loss or foreclosure, it also sparked a robust rental market and a surge of high-end luxury developments. But as older millennials finally start to settle, they’re remembering when homes held their value. The NAR says that 84 percent of millennial buyers considered their home purchase a good financial investment in 2015, the highest rate among all generations NAR surveyed.
“They’re starting to trust the system again,” says Coldwell’s Amanda Schroder, a millennial herself who sold Knudsen and Nguyen their home, an East Side Victorian that more than doubled the space of their Downtown rental. “And they’re finding that they can oftentimes own for less than they would spend in rent.”
Mirroring their career trajectories of job-hopping every two to three years, they often view homebuying as a short-term prospect.
“A lot of millennials have plans already when they buy a house, to sell it,” says Hearst, adding that today’s client may be a repeat customer as soon as a few years later. A big reason for that, Schroder notes: “People don’t want the house they buy to hold them back from anything else they may have coming down the line.”
That’s been the case for another recent Schroder client, 32-year-old anesthesiology assistant John Rippy. He bought his first home in May 2015 – a condo in the Blatz building – despite having $150,000 in student loan debt and some minor job instability.
Rippy also watched his parents struggle through the recession, but eventually, buying became a business decision. “The rental market is kind of out of control here,” he says, mentioning a friend who pays more for her one-bedroom Downtown rental than he does for his two-bedroom mortgage. He knows that if he can’t sell his condo quickly, he can still rent it out. “Even if I leave in a year or three years or five years, at least I’d have some amount of equity in a home and wouldn’t just be throwing the money away on rent.”
Rippy loves both his condo and his job, but, like many millennials, views his career – and homeownership – as things likely to shift and evolve. “If in the future, say another year or two years, I am stagnating, I may need to leave,” he says. “And that fear of me owning this place is absolutely not there anymore.”
What you’ll get for…
- Style: Cottage
- Sold Price: $166,500
- Year Built: 1906
- Sq. Footage: 1,578
- Beds/Baths: 4 beds; 1 full
- Style: Cape Cod
- Sold Price: $149,991
- Year Built: 1948
- Sq. Footage: 1,440
- Beds/Baths: 3 beds; 1 full, 1 half
- Style: Colonial
- Sold Price: $169,000
- Year Built: 1964
- Sq. Footage: 1,629
- Beds/Baths: 4 beds; 2 full
- Style: Ranch
- Sold Price: $247,000
- Year Built: 1998
- Sq. Footage: 1,411
- Beds/Baths: 3 beds; 2 full
- Style: Colonial
- Sold Price: $250,000
- Year Built: 1966
- Sq. Footage: 2,009
- Beds/Baths: 4 beds; 2 full, 1 half
- Style: English Tudor
- Sold Price: $240,000
- Year Built: 1930
- Sq. Footage: 1,526
- Beds/Baths: 3 beds; 1 full
- Style: Colonial
- Sold Price: $491,000
- Year Built: 2009
- Sq. Footage: 2,030
- Beds/Baths: 4 beds; 3 full
- Style: Split Ranch
- Sold Price: $504,500
- Year Built: 2007
- Sq. Footage: 3,880
- Beds/Baths: 4 beds; 3 full, 1 half
- Style: Colonial
- Sold Price: $490,000
- Year Built: 1928
- Sq. Footage: 2,471
- Beds/Baths: 4 beds; 3 full
- Style: Cape Cod
- Sold Price: $740,000
- Year Built: 1953
- Sq. Footage: 5,687
- Beds/Baths: 5 beds; 6 full
- Style: Schley English Tudor
- Sold Price: $780,000
- Year Built: 1925
- Sq. Footage: 4,177
- Beds/Baths: 5 beds; 3 full, 1 half
Lac la Belle
- Style: Split Bedroom
- Sold Price: $750,000
- Year Built: 1950
- Sq. Footage: 2,712
- Beds/Baths: 4 beds; 3 full
- Style: Colonial
- Sold Price: $1,091,303
- Year Built: 1997
- Sq. Footage: 5,100
- Beds/Baths: 5 beds; 4 full, 1 half
- Style: Corner Condo
- Sold Price: $1,100,000
- Year Built: 2009
- Sq. Footage: 2,673
- Beds/Baths: 3 beds; 3 full
- Style: English Tudor
- Sold Price: $960,000
- Year Built: 2000
- Sq. Footage: 6,200
- Beds/Baths: 6 beds; 5 full, 1 half
*Information from MLS in 2015.
A Taxing Look at Property
Checking the levies with a nod toward values. By Matt Hrodey
Property taxes are the ultimate in lovable levies. They fund schools, police officers, firefighters and local road repair. But loving a tax can get complicated. In an April 2015 survey by the Marquette Law School, some 54 percent of Wisconsinites said they’d rather increase spending on public schools than benefit from a property tax cut. The children are our future! Yet in 2014, another Marquette survey revealed 90 percent of Wisconsinites agreed that “people in the government waste a lot of money we pay in taxes.”
For homebuyers, these nuances matter, and high taxes are not always a bad thing. “They look at the quality of services,” says Dale Knapp, research director for the Wisconsin Taxpayers Alliance.
“Are the roads maintained? Is it a safe community? What are the schools like?”
In southeastern Wisconsin, Brown Deer, Racine and Milwaukee have the highest total rates, and the upscale suburb of Mequon one of the lowest. But Knapp says you must take into account home values. After all, that’s what determines your bill. So we used median home values for Milwaukee, Waukesha, Washington, Ozaukee and Racine counties from 2010-14, and 2015’s property tax rates, to create the graphic below. Milwaukee ranks as the seventh-most expensive city, with a standard bill of $4,419.30 on a median house valued at $154,400.
The Temporary Neighbors
With the help of services like Airbnb, short-term rentals may have a long future. By Daniel Simmons
The tidy two-story house with white siding hardly looks different from its neighbors on this residential street in Whitefish Bay. But it stands out for other reasons: The owners live in Connecticut. The inhabitants change often, renting it for two or four or nine months, then moving on before the next tenants move in.
A medical resident in town for a summer rotation crashed there. A family of five who moved from out of state and needed a house for a year did, too. More recently, an East Coast business exec who had a busy couple months of meetings in Milwaukee called it home.
These types of short-term rentals, advertised online at Craigslist and especially Airbnb, have become increasingly popular – and controversial – in other cities. They operate like hotels but offer tenants the comforts of a home or apartment in a neighborhood.
Airbnb has seen torrid growth nationally since it started in 2008. Most rentals, nationally and in Milwaukee, require booking for just a night or a week, and are in densely populated central cities.
Because of their short-term nature, the new wave of rentals has faced withering opposition from the hotel industry, and some civic leaders fearful about the instability posed by strangers staying nightly in residential areas. But the house in Whitefish Bay takes a different approach.
Annalisa Nash Fernandez and her husband bought it in 2013 for about $260,000, then sank another $120,000 into a renovation project. They did so to fill a gap in the short-term rental market.
They’re not angling for nightly travelers, but families and others facing the same situation that they once did: new to Milwaukee, looking for a furnished house in a safe neighborhood with good schools, not knowing exactly how long they’ll stay.
“When we came here, ‘home for rent’ didn’t go together in the same sentence,” Fernandez says. “In Milwaukee, ‘rental’ means an apartment.”
Fernandez moved with her family to Milwaukee in 2009, and the native of Seal Beach, Calif., was not thrilled to do so. Once here, though, she took to it. When a job change meant they had to move again – this time to Connecticut – in 2015, she was sad to leave. “I came here kicking and screaming,” she says, “and I left here kicking and screaming. This is La La land. It’s just a really ideal place to live.”
When they left, they wanted another rental house – they operate similar rentals in places they previously lived, including Miami and Brazil. It would be an investment for themselves and a refuge for Milwaukee passers-through who have the means. Rent is $4,900 a month, with a security deposit and two months’ rent due at signing. An exhaustive background check is required.
Fernandez handles everything herself, from vetting tenants to arranging repairs. It’s not been the profit monster some might expect, because it sometimes sits vacant for months between tenants.
And relations with the neighbors? Neither good nor bad, and mostly nonexistent. Fernandez says she’s met them only briefly. And her tenants, so far, have always left her house and its furniture in good shape.
They paid how much? By Jonathan Powell
The Lake Effect
Who’s buying on the shores? Not Chicagoans. By Rich Rovito
If you believe idle speculation and occasional anecdotal evidence, Chicagoans have spent the last decade or so buying up Milwaukee-area lakefront property, a flatlander invasion of Bears and Cubs fans securing a less-congested experience for their weekend getaways or second residences.
“That’s the biggest myth ever,” insists Chris Corley of Corley Real Estate in Milwaukee. “In eight years, I’ve sold one condo to someone from Chicago.” Instead, his clients are almost exclusively empty-nesters moving to Downtown Milwaukee from its suburbs, or people moving to the area because of their jobs.
Robert Monnat, chief operating officer at Milwaukee-based development firm Mandel Group, says Chicagoans bought some property in southeast Wisconsin during the “heyday” of condo sales years ago because it was less expensive. “More than a few units” went to “out-of-town buyers with ties to Milwaukee,” he says.
And Shorewest agent Jim Schleif says he’ll occasionally sell a lakefront home or condo to a Chicago-area buyer as a second residence. “But I don’t think it’s a documentable trend.”
Indeed, Doug Bay, a real estate agent with First Weber who handles properties in Bay View and the South Shore, says he hasn’t sold lakefront property to anyone from Chicago looking for a part-time Milwaukee experience.
As for Corley, what little interest he’s had from Chicagoans usually ends with them walking away from a sale due to high property taxes. He says it’s plausible that Chicagoans are renting apartments in the metro area, but he insists they aren’t buying.
So the invasion, it seems, is no threat to these shores.
An Architect’s Vision
James Dallman puts down his pencil to chat. By Carolyn Kott Washburne
James Dallman is a principal of La Dallman Architects, along with his wife, Grace La. The internationally recognized firm has designed a broad range of projects, including civic buildings, houses and public spaces, including a certain marsupial spot.
Where do you get inspiration for your designs?
There is a myth about architects being inventors, creating things from scratch. It’s more a question of how you shape and reconfigure the world. The work is very rooted in community and collaboration. Architects are more like conductors or choreographers.
What are the challenges of working with residential clients?
We’ve had the good fortune of working with people exceptionally invested in the outcome. They know why they’re doing a project – to declutter, shape space, live more in touch with the landscape, be bathed in daylight, etc. They don’t just want a turnkey home, where the architect makes all the decisions for them. So our residential projects have become a microcosm of the research and investigation we pursue in all of our projects.
And institutional clients?
Usually the issues there are budget and timeline. Institutional clients need to get a lot out of the budget, and we need to go through the process relatively rapidly. Actually, constraints can be a blessing, because they create innovation.
Which projects give you the most pride?
I don’t have favorites – they’re like children to me. But if you press me – the Marsupial Bridge [under the Holton Street Viaduct], because of its impact on the community. It’s a gathering place, an icon where people go to take pictures. And it created better access to different parts of the city.
Is Milwaukee a good place for architects?
Milwaukee is a very transparent community. You can introduce yourself to leaders in every field – there is no social hierarchy as there is in other cities. And Milwaukee benefits from the center of excellence that is the UWM School of Architecture and Urban Planning. We want to see Milwaukee continue to be innovative and become more of a design center. There are some very good architects here, and good community support. And there is always room for growth.
Searching For the Light at the End of the Tunnel
Signs of recovery in neighborhoods hit hard by foreclosures. By Rich Rovito
Raised in a poor neighborhood on Milwaukee’s West Side, Madee Saenphonphakdee is a recent college grad who works part time as a delivery driver and is on a tight budget.
He’s also a new homeowner.
The city’s foreclosure problem has left many neighborhoods pocked with boarded-up homes. Saenphonphakdee bought one of them off West Highland Avenue in June. Its prior owners lost it in a property tax foreclosure.
With the assistance of ACTS Housing, which provides homebuying services to support low-income buyers, the 28-year-old Saenphonphakdee got his home for only $3,500. “You really have no mortgage,” he says.
But he’s been laboring for months, mainly on his own or with the help of a plumber and an electrician, to make an array of improvements to the house. Some are aesthetic, others are necessary to meet code requirements before he can move in.
Needed repairs will run an estimated $20,000, the cost of which is being covered through grants from the city, he says.
Boosting homeownership strengthens neighborhoods often considered “undesirable,” says Michael Gosman, ACTS Housing’s executive director. ACTS assists more than 100 families per year in buying central city houses, many of which are vacant, vandalized or foreclosed. “Sometimes lost in all the gloom and doom is that there are blocks in these neighborhoods that are filled with strong families,” Gosman says.
In 2015 a reported 5,073 foreclosure actions were filed in southeastern Wisconsin, less than the 6,401 reported in 2006, before the recession, and well below the peak of 12,745 in 2009.
“We are seeing light in the tunnel,” Milwaukee Mayor Tom Barrett says, “but not necessarily light at the end of the tunnel.”
Barrett says Milwaukee owns about 1,300 properties through foreclosure due to tax delinquencies. The city has sold some 950 foreclosed properties over the past two years and demolished another 600 distressed houses.
Saenphonphakdee’s two-story, single-family home, adjacent to a boarded-up, dilapidated house, already shows evidence of his work. There are new windows and a repaired porch.
He hopes to move into the house before spring. Until then, he’ll keep living in the house in which he was raised just a few blocks away.
Unwinding the Foreclosure Crisis
How Milwaukee absorbed its real estate gut punches, and how it responded. By Erik Gunn
2005: Subprime lending, targeted mostly to Milwaukee’s poorest homeowners, peaks at more than $1 billion in loans, up from just $7.7 million in 1993. The failure of many of these loans is blamed for the first wave of foreclosures.
2007-2008: With more than 10,000 foreclosures on Milwaukee properties in two years, Mayor Tom Barrett convenes a group of government officials, philanthropists, regulators, lenders, and nonprofit and community representatives.
February 2009: Barrett’s group, formally named Milwaukee Foreclosure Partnership Initiative, crafts an agenda for counseling, stronger consumer protection, court mediation, and reoccupation, sale or disposal of vacant properties.
June 2009: Take Root Milwaukee – made up of community groups, banks and real estate agents – forms to sponsor public education and counseling to help homeowners deal with foreclosures.
2009-10: Foreclosures continue to skyrocket during the Great Recession, with 10,600 more homeowners hit. Tax foreclosures follow suit, as the city assumes ownership of more than 400 properties in 2010 – five times the 2007 total.
January 2011: With $40 million from the 2009 federal Neighborhood Stabilization Program, the city leverages about $125 million in private investment for foreclosed housing.
2012-14: Milwaukee-area borrowers receive a large share of the state’s nearly $200 million in loan-related relief under the $50 billion National Mortgage Settlement.
2014: In its first year, the city’s $11.7 million Strong Neighborhoods Plan sells 437 foreclosed homes, returns $19 million to city tax rolls, demolishes 440 blighted properties, and sells or improves 225 vacant lots.
Overall impact: In all, the crisis cost the city about 10 percent of its home ownership and $5 billion in taxable real estate value.
Tune in to WUWM’s “Lake Effect” March 1 at 10 a.m. to hear more.