An Analysis of Real Estate Inventory: Why Now Seems Like A Great Time To Sell
I recently analyzed inventory data for single-family homes located in Milwaukee County between November 2010 and October 2012 to determine if demand is keeping up with supply.
For the years that followed the peak in 2006, buyers have since left the market causing a glut of inventory of homes. The few buyers that remained in the market found plentiful options and great bargains during the Buyer's Market of that time.
In 2012, the market shifted again toward a healthier, more balanced market. Today's buyer is still enjoying the benefits of historically-low interest rates and low housing values; but, have much fewer options than those buyers who purchased homes in 2011. Many real estate agents are noticing an increase in the number of bidding wars. Fewer inventory (i.e. competitors) may mean greater opportunities for you to sell your home during a market where demand seems to be keeping up with supply. Buyers are back!
My analysis includes four categories of inventory: (1) Active Listings (in Total), (2) New Listings, (3) Pending Listings (an indicator when offers were being written and accepted), and (4) Sold Listings.
Inventory levels peaked during Q2 2011 and have generally declined since. We typically experience a cycle during the course of the year which indicates that the market slows during the winter months and peaks during the spring/summer months. For this reason, our lowest point occurred during January 2012 and bounced back up in February. However, over time, inventory has declined since July 2011.
NEW LISTINGS:
Low: 520 Listings Entered the Market (December 2011) Peaked: 1,145 Listings Entered the Market (March 2011) Current: 734 Listing Entered the Market (October 2012)
As noted with Active Listings, inventory levels (along with new entrants to the market) tend to decrease during the winter months and increase during the spring/summer months. New entrants to the market dipped during Q4 2011, increased sharply during Q1 2012, and has tapered off since.
During the 24-month period analyzed, the frequency of real estate sales increased to its peak during Q2 2012 and has slightly tapered off since.
OVERALL OBSERVATION
Within a calendar year, there appears to be a cycle - peaking during the Q2 and dipping during Q4. The peak season appears to begin early each year (February 2012) and continues through the summer/fall. Despite the cycle, it is important to note that buyers are still submitting offers (196 offers accepted during October 2012) and deals are still closing during the quieter months (552 closed deals during October 2012).
Demand - as reflected by Pending and Sales - peaked during Q2 2012 and has decreased slightly since.
Supply - as reflected by Active and New - peaked during the first half of 2011 and has decreased since.
Supply of homes peaked approximately one year before demand peaked. For this reason...
"In 2012, the market shifted again toward a healthier, more balanced
market. Today's buyer is still enjoying the benefits of
historically-low interest rates and low housing values; but, have much
fewer options than those buyers who purchased homes in 2011. Many real
estate agents are noticing an increase in the number of bidding wars.
Fewer inventory (i.e. competitors) may mean greater opportunities for
you to sell your home during a market where demand seems to be keeping
up with supply. Buyers are back!"
Message for Home Owners Who Are On The Fence About Selling
This analysis seems to indicate that Buyers are back with limited number of options. It would seem likely that you will experience greater success in selling your home than those who attempted to sell their home since the peak of the housing market. If you are contemplating selling your home, then I suggest you beat the cycle and enter the market shortly after the new year begins.
Please leave a comment or send me an e-mail at dray@shorewest.com and let me know if you have any questions regarding my analysis or the real estate market in Metro Milwaukee. -----
2Parks NID: It's Impact on Milwaukee's East Town & Your Wallet
The 2Parks NID is a proposed plan that will tax the home/condo owners who reside within the East Town Association and business owners who operate a business within the East Town Association. The NID will put aside tax revenue to help enhance and improve two parks: Cathedral Square Park and Juneau Park.
I think we can all agree that everyone wants to have the nicest looking parks in the county. During the last City Plan Commission (CPC) meeting, the members who initiated the proposed NID hired a local architect to draft plans for the two parks. At first glance, the renderings looked very impressive.
The CPC ruled that further discussion among the members of the proposed NID needed to be done before it would approve such an idea. Topics for further discussion include:
(1) Is it fair and equitable to tax a few people for the benefit of many? One can assume that Cathedral Square Park draws more people in from outside the East Town Association during their weekly farmer's market, during their weekly outdoor jazz concert, or during their annual Bastille Days festival.
(2) Who are the likely candidates to receive any financial benefit of improved parks? It can be viewed that those entities that will see greater financial reward for improved parks are the businesses that surround them. As a condo owner who resides in the East Town, what financial benefit will I receive from paying this additional tax to improve the look of our neighborhood parks? In my opinion, this seems like an opportunity to shift money in our savings account to local business owners as well as the firms that will be hired to improve the look of our neighborhood parks.
(3) Does the existence of a NID create a two-tier park system in the county? This argument suggests that residents who live in more affluent sections of the county will enjoy a higher-tier park versus those that are not in the best financial position to create a NID (thus, only relying on county tax dollars to maintain the parks). Again, is this fair for the residents of Milwaukee County?
(4) More transparency, more accountability, and city representation. Who are the members of the proposed NID? Alderman Bauman argued during the last CPC meeting that a representative from the city should receive voting rights on the Board so that the NID doesn't make improvements to our parks that may not be in the best interest of the city and our neighborhood.
I encourage all of my readers (especially those that live in Milwaukee's East Town) to attend both the information session and the CPC meeting. Don't know much about the 2Parks NID? Now is a good time to dive in and explore its impact on the East Town Association and its residents.
Disclaimer: This is a personal blog. The opinions expressed here represent my own, those providing comments are theirs alone, and none of which reflect the opinions of Shorewest, REALTORS(R) or any employee thereof. Shorewest, REALTORS(R) is not responsible for the accuracy of any of the information supplied by me or those who provide comments on this blog.
Medicare Surtax in 2013: Impact on Real Estate Transactions
Do you own real estate as an investment? Are you looking to sell any of your investment properties during the next 12 months? You may wish to consider selling them in 2012 as it may be more expensive to do so beginning in 2013.
According to the National Association of REALTORS® (NAR): "Beginning January 1, 2013, a new 3.8 percent tax on some investment income will take effect. Since this new tax will affect some real estate transactions, it is important for [you] to clearly understand the tax...Understand that this tax WILL NOT be imposed on all real estate transactions, a common misconception. Rather, when the legislation becomes effective in 2013, it may impose a 3.8% tax on some (but not all) income from interest, dividends, rents (less expenses) and capital gains (less capital losses). The tax will fall only on individuals when an adjusted gross income (AGI) above $200,000 and couples filing a joint return with more than $250,000 AGI."
A short video from Putnam explains how the tax works:
The NAR prepared the following PDF to provide additional information regarding the Medicare Surtax as well as case examples under various situations:
Please leave a comment and let me know if you have any additional questions or concerns regarding the Medicate Surtax and its impact on your next real estate transaction.
Based on most recent mortgage rate sheet from Wisconsin Mortgage Corporation
(www.wimort.com).
Disclaimer: Posted rates are subject to adjustments based on Customer Credit
Score and Loan-To-Value. Terms are subject to change without notice. This is
not an advertisement to extend consumer credit per Sec. 226.2 of Regulation Z.
Please leave a comment if you need any additional information.
I’m sure by now many of you have read that President Barack Obama has signed a law that extends and expands the first-time homebuyer tax credit.
Unlike the former tax credit, the new law provides a deadline for a binding purchase contract; not a closing date deadline.Structuring the law in this manner provides easy-to-follow guidance to the general public regarding what needs to be accomplished and when.The former law was somewhat confusing because it required real estate professionals to back-into the binding purchase contract deadline to ensure deals closed in time to take advantage of the tax credit.
FIRST-TIME HOMEBUYER TAX CREDIT EXTENDED
The new law recently signed by President Obama automatically and immediately extended the deadline from the original November 30, 2009 deadline to June 30, 2010 (if and only if a purchase contract is binding on or before April 30, 2010.).Therefore, a note to you prospective buyers, your target date for having an accepted purchase contract is April 30, 2010.
For the sake of this tax credit, a first-time homebuyer is defined as a buyer who has not owned a principal residence during the three-year period ending on the date of purchase.Therefore, if you have previously owned a principal residence prior to the start of this three-year grace period, you would still qualify for the first-time homebuyer tax credit.
The new law only extended the former law’s deadline.The amount of the first-time homebuyer credit is still limited to $8,000.
REPEAT BUYERS ARE NOW INCLUDED
The new law has also been expanded to provide financial assistance to existing homeowners who purchase another primary residence.
For the sake of this tax credit, an existing homeowner is defined as a buyer who has lived in their current home as a primary residence for a period of five consecutive years during the past eight years ending on the date of the new home purchase.The new home must also be used as their primary residence.
The amount of the existing homeowner credit is limited to $6,500.
OTHER TERMS AFFECTING THESE TWO CREDITS
U.S. Income-Tax Paying Individuals
The first-time homebuyer and existing homeowner credits are available to all United States citizens who file their annual income taxes.
Individual Income Limits
The amount of the credit you can claim for these credits are determined by your filing status and the amount of your computed Modified Adjusted Gross Income (MAGI).
Single or Head-Of-Household Filers:The full amount of the credit is available as long as your MAGI is at most $125,000.The credit is completely phased out with an MAGI of at least $145,000.
Married Filing Joint Filers:The full amount of the credit is available as long as your combined MAGI is at most $225,000.The credit is completely phased out with a combined MAGI of at least $245,000.
Property Type & Purchase Price Limits
Any home that is purchased with the intent of owner-occupying as a primary residence qualifies for the first-time homebuyer and existing homeowner credits.The purchase price for both credits is limited to $800,000.By definition, vacation homes and rental properties will not be treated as a primary residence and thus are not eligible for either credit.
Refundable Tax Credit & No Payback
Both the first-time homebuyer and the existing homeowner credits are refundable credits.Therefore, regardless of your tax liability, the amount of the credit that you can claim will reduce your liability.If you are expecting a refund before computing these credits, this will increase the amount of your refund.
These credits are also true credits.Unlike the 2008 version of the first-time homebuyer tax credit that requires homebuyers to repay their tax credits over a fifteen-year period, the new law extends the 2009 version that does not require repayment (general rule).There is one exception to the general rule:The homeowner must pay back their credit if and only if he or she sells the home or stops using the home as his or her primary residence during the three year period starting on the date of the new home purchase.
All qualified homebuyers can apply for the tax credit on either their 2009 or 2010 income tax returns.
Please contact me if you have any additional questions regarding the newly-extended first-time homebuyer credit or the newly-created existing homeowner credit.
BizTimes Media: The Moderne ready to go | Business Journal of Milwaukee: Behind the deal - Downturn forced developer to turn to unusual money sources
After three years of working on the $55.2 million Moderne, condo developer Rick Barrett has finally secured a financial deal involving the City of Milwaukee that will enable him to break ground on the latest luxury condominium highrise to be constructed on the southwest corner of Juneau Avenue and Old World Third Street in the Park East corridor.
The proposed 30-story Moderne will feature 203 apartments, 14 condominium units, and first floor retail. Of the 14 condominium units, half will be priced between $250,000 and $500,000. The other half will be priced between $900,000 and $2.5 million. As of this writing, Barrett has reported that four condominium units are reserved; three of which are priced between $900,000 and $2.5 million.
On November 4, Milwaukee’s Common Council voted in favor to provide Barrett with a $9.3 million loan for The Moderne. After receiving approval of the city’s loan, Barrett is expecting to break ground on The Moderne in December.
Barrett indicated that the loan from the city was necessary because the financial services industry has tightened their lending policies substantially during the recession. Since the recession began, real estate developers were finding it very difficult to obtain financial backing from investors.
Common Council is optimistic that this will be the first of many successful projects for the Park East corridor.
Common Council expressed reservations about providing a loan of this magnitude for a condominium development. Critics felt that approving such a loan would put the city’s taxpayers at risk. Many argued that the public sector should not provide financial support that the private sector wasn’t willing to assume. Also, supporting a new condominium development would only create more competition for downtown condominium housing that will continue to keep housing prices in check.
Those who supported the city’s loan indicated that the benefits outweigh the costs of this proposal. The strict lending policies of the financial services industry were preventing real estate developments from breaking ground which also prevented the creation of construction jobs. Common Council members who supported the measure argued that The Moderne would create construction jobs and increase the city’s tax base. I tend to think that this argument is very short-sighted and have expressed my opinion below under the section “My Thoughts”.
In addition to receiving a $9.3 million loan from the City of Milwaukee, Barrett has also secured financial backing from the AFL-CIO Investment Trust, which is serviced by Capmark Financial Group and guaranteed by the U.S. Department of Housing and Urban Development. Other financial supporters include Barrett and his partners.
Barrett expects to sell all of the condominium units within four years - which covers the term of the city’s $9.3 million loan.
My Thoughts
As a REALTOR®, I am happy to see that Downtown Milwaukee is continuing to grow and develop. As a REALTOR®, I am also concerned that the supply of downtown condominium units continues to remain high.
In recent weeks, I have read articles about the foreclosed actions against Park Lafayette and Wisconsin Tower. As I read these articles, I wonder if the market is telling real estate developers to back off. I also wonder if the market is telling our city officials to back off as well.
Those Common Council members who supported this loan argued that The Moderne would add to the tax base of the city. I disagree. The tax base is determined by the assessed values of real estate located in the city. Assessed values are determined, for the most part, by fair market values. As we continue to add more and more competition to our current housing stock, prices will continue to decline. As fair market values decline, so does the assessed values and city’s tax base. Simply adding a new development, such as The Moderne, may not necessarily add to the city’s tax base.
At the end of the day, we’re talking about the addition of 14 condominium units to the total number of condominium units already established in downtown Milwaukee. Will 14 new condominium units significantly influence the current market conditions in downtown?
I guess we will have to wait and see how The Moderne impacts the local economy.
If you were elected as Alderman, how would you have responded to the $9.3 million loan request?
Milwaukee Journal Sentinel: UWM drops plan to put freshwater school at lakefront site
For months, it seemed certain that the University of Wisconsin-Milwaukee (UWM) was going to have a brand new School of Freshwater Sciences at the former Pieces of Eight restaurant site.
Almost immediately, the announcement of the site location drew criticism. Opponents argued that the site should remain available for public use and be turned into green space along the lakefront.
Apparently the opponents won this battle. In a surprise move, university officials announced that they are cancelling their plans to build the school on that site and will immediately resume their search for another location.
The university’s decision was made just one month after Michael Cudahy purchased the lease of the property for $1 million. Cudahy, a local philanthropist, was planning to donate the lease to UWM if the university won approval from city officials.
University officials cited several reasons for their decision including: (1) fight over the proper use of the site could adversely impact their ability to move forward with the new school, and (2) the restaurant site was not spacious enough to handle the needs of the school. Officials were concerned that the emotional battle over the use of the site would make it difficult for them to raise funds for the development. Officials also argued that a larger site is needed to accommodate classrooms as well as research labs.
Needless to say, the university’s decision upset Cudahy. The lesson to be learned is that when someone offers to give you $1 million in the form of a donation, you move forward with the proposed plans. According to Cudahy, “I just can't believe the university would cower under a few comments."
My Thoughts
Who knew that a parcel could cause so much controversy? There are certainly winners and losers in this battle.
Let’s start off with the losers - as there is a greater potential for a larger number of losers.
First, is the City of Milwaukee. University officials suggested that without building their school in such a prominent place as the site of the former Pieces of Eight restaurant, Milwaukee potentially loses its ability to be recognized as the center of water technology. Even Mayor Tom Barrett was hopeful that the school would have been built along Milwaukee’s lakefront. Now, Barrett’s biggest concern is that UWM chooses an alternative location that doesn’t have a city of Milwaukee address.
Second, is UWM. How likely is it that you will find another prominent, financially-able, individual who is willing to donate money you need to build your school? You now have a history of going against a donor’s wishes of making the school a reality.
Third, is the region. For months we have been hearing the buzz about how Southeastern Wisconsin could be the international center for freshwater technologies. With the current economic climate and historically-high rate of unemployment, the water technology industry would create jobs that will enable us to get through the recovery process faster.
I’m sure there are more losers, but it’s time to think of the winners in this deal.
For starters, the Cousins Center and the City of Port Washington appear to be on the university’s radar screen for the new school.
Milwaukee’s aldermen are quickly trying to find other alternative locations to keep the school in Milwaukee. One site that seems to make sense is in the Historic Third Ward. The city owns a parking lot that is being used by Maier Festival Park at the end of East Erie Street. This site has some appeal because of its accessibility to the harbor as well as offering sufficient space to meet the classroom and research needs of the university.
Let’s not forget that Cudahy still owns the lease to the former site of the Pieces of Eight restaurant. There’s still hope that this land will developed that will meet the needs of the city as well as its citizens.
Finally, Joe Bartolotta. His name and the Bartolotta Restaurant Group are being tossed around with the possibility of re-opening another restaurant on that site.
For those who have been following this story through my blog knows that I have always felt that using this site for a school did not make the most sense. One of my favorite dining experiences occurred at The Fish Market in San Diego. The food and service was very good. But, what really made the experience was looking out over the bay. The setting was beautiful. I have always wondered why Milwaukee could not have a successful restaurant that overlooked the lake, harbor, and downtown.
Blogger’s Note: Is it right to call UWM a loser for backing out of this deal? I still think it was a foolish decision. However, Cudahy isn’t looking very good these days. According to Daykin, Cudahy would have controlled the design and construction of UWM’s school if his proposal was accepted by UWM (article titled “Cudahy wanted to control design, construction of UWM lakefront project”, September 17, 2009). Clearly giving up such control is not in the university’s best interest.
The Business Journal of Milwaukee: Project aimed at water businesses - 5th Ward project would add $117 million in development
Atlas Development Corp. (“Atlas”), Milwaukee, and General Capital Group, Fox Point, are proposing to build a 630,000-square-foot business park located on 17 acres between South Sixth Street, South Third Street, the Menomonee River Canal and West Florida Street.
The $117 million business park is planned to attract water-based technology firms.The proposed park includes office and research buildings, and at least one multi-family residential building.
Atlas and General Capital Group are seeking $6.5 million in tax incremental financing (TIF) from the city.The money would be repaid through property taxes generated by the new developments.Under the proposal, the city will spend $4.2 million for infrastructure, $900,000 to finance the business park’s first building, and $1 million in grants to attract water-based technology businesses.
Atlas and General Capital Group are hoping that the City of Milwaukee will approve this redevelopment site for a TIF district as the city will benefit from the new, highly-anticipated water technologies industry along with the University Of Wisconsin Milwaukee School Of Freshwater Sciences.
According to Pete Millard, writer for The Business Journal of Milwaukee, “The Milwaukee Common Council’s Zoning, Neighborhoods and Development Committee will review the TIF plan Sept. 15, and the Common Council is expected to vote on the TIF resolution Sept. 22.”
My Thoughts
In recent months, the Fifth Ward has received a great deal of attention from real estate investors and developers.And why not?It’s proximity to Downtown, Historic Third Ward, Walker’s Point, Bay View, and the Menomonee River Valley makes it appealing for a variety of reasons, especially the water-based technologies that the region is promoting.As long as the economy holds together and the City of Milwaukee is able to work with the University of Wisconsin-Milwaukee, I anticipate that the Fifth Ward will continue to receive greater interest regarding future real estate developments.
First-Time Home Buyer's Tax Credit Deadline Is Approaching!
Do you qualify for the First-Time Home Buyer’s Tax Credit?The answer might surprise you!It’s not just for first-time home buyers.Please contact me if you have any specific questions about the qualifications of this tax credit because it is on a case-by-case basis. Please e-mail me at dray@shorewest.com or call me at (414) 412-7980.
The purpose of this blog post is to offer those who qualify a suggested course of action as the deadline is quickly approaching.
To qualify, your transaction must close before December 1, 2009 (or on or before November 30, 2009).
Many mortgage providers and title companies are expecting a large spike in activity during the final months leading up to this key deadline.
Therefore, here is a suggested time line for those who still want to take advantage of the free money:
Closing Date: Before December 1 (On Or Before November 30)
However, title companies will be swamped on this date.Closing attorneys and conference rooms will be difficult to find. November 30 is a Monday.Other notable dates: Thursday, November 26 is Thanksgiving. Friday, November 27 and Monday, November 30 will be very busy dates as well for closings. Most companies are closed the Friday following Thanksgiving (this might be the case for title companies as well).
For cushion, I suggest that you plan accordingly and make sure your transaction closes before Thanksgiving.
Most buyers like to close on Fridays to allow moving to take place over the weekend.Therefore, I suggest closing on or before Friday, November 20.
Acceptance of Offer:
It used to be a safe bet to figure 30 days from contract to closing.If you are feeling lucky, then I suggest having an offer accepted no later than October 21.This is not the date that you should begin the negotiations!
Most mortgage providers and title companies are expecting huge delays throughout every step of the transaction (most of which is even beyond my control).These professionals are suggesting that the 30-day rule should not apply during this period.A few are suggesting 45-days (at the very earliest from contract to closing).Most believe that the 30-day rule should be increased to 60 days during this period. I also recommend giving you 60 days from contract to closing to ensure that your closing occurs within the set time frame.
Therefore, I recommend that your Offer is not accepted no later than September 21 to ensure that your closing occurs prior to December 1.Again, this is not the date you should begin negotiations.
Begin Search:
This depends on how much time you would like to give yourself to search for your next home.September 21 is five (5) weeks from tomorrow, August 17, 2009 (five open house dates).
Please e-mail me at dray@shorewest.com or call me at (414) 412-7980 and let me know if you have any specific questions regarding the First-Time Home Buyer's Tax Credit.
Blog dedicated to news and information about Milwaukee's growing condo market. Information maintained by David Ray of Shorewest Realtors, specializing in condos in Milwaukee's downtown, East Side, Third Ward, Brewer's Hill, and Walker's Point. For more information about buying or selling real estate in Milwaukee, please contact David Ray at 414.961.8314 X148, dray@shorewest.com, or DavidKnowsDowntown.com.
Real Estate Broker Associate / Realtor® / CSRS / CPA ***** I am a lifetime resident of metro Milwaukee Area. I enjoy the restaurants, activities, events, and nightlife in Milwaukee's downtown and surrounding areas including the East Side, Third Ward, and Walker's Point. I am a Real Estate Broker Associate, Realtor®, and Certified Shorewest Relocation Specialist specializing in the downtown Milwaukee condominium market, although I represent buyers and sellers through the greater Milwaukee area. When not listing, showing, or selling real estate, I enjoy walking my two Shiba Inus (a Japanese breed) and relaxing with family and friends.
