Real estate market stunned by ‘crazy’ house shortage

Where “For sale” signs once dotted the landscape throughout Ozaukee County, today they are few and far between as homeowners hang onto their houses — and the low mortgage rates they are paying — even as potential home buyers scour the market looking for a place to call their own.

The inventory is so low that some potential buyers are knocking on the doors of houses they are interested in to see if they can convince the owner to sell to them, Barb Beattie of Beattie Janeshek Realty Group said.

The burgeoning demand, combined with a lack of inventory, is creating a market unlike any they’ve seen, area real estate agents say.

The culprit, they agree, is interest rates that are now almost 8% for a 30-year mortgage compared to 2% just two years ago.

“Homeowners are married to their interest rate,” Tom Didier of Re/Max United said. “Those people locked in at 3% have very little interest in buying a new home at 7%. Homeowners are staying in their homes; they’re just making them nicer.”

“People think, why should I move up? That’s a big jump in the payment,” Will Hollrith of Hollrith Realty said. “People think in terms of their monthly payments.”

And that, he said, means low inventory.

“I have people who would love to sell,” Beattie said, but they can’t afford a new home. “They don’t want to go into a rental so they’re holding on.”

A year ago, Didier said, predictions were that interest rates would decrease to about 5%, but that hasn’t happened.

“When the 30-year fixed rate comes down to 5%, you’ll see things change,” he predicted. “People are willing to go from 3% to 5%, but they’re not willing to go from 3% to 7%.”

People do have options, Beattie said.

“There’s all kinds of creative financing out there,” she said, such as adjustable rate mortgages which typically have a lower interest rate for the first few years. At the end of that time, she said, buyers can refinance, hopefully to a lower rate.

“We tell buyers, marry the house, date the rate, Didier said.

Even people looking to rent a single-family home are finding the market is crazy, Didier said.

“This is the first time we’ve seen tenants offer more in rent than we were asking,” he said, noting many are potential home buyers frustrated to the point of renting.

“They’re finding it’s just as competitive on the rent side,” Didier said.

But the high price of rent is also sending some people into the housing market, Hollrith said.

“People have to make a choice, continue to pay rent at super-high prices or buy a house but at a higher interest rate and build equity for the future,” he said.

The ramifications go beyond the housing market.

Wisconsin Realty Associate Executive Vice President Tom Larson said in a video message, “We don’t have the housing to attract the workers to fill the jobs, and without workers to fill the jobs our businesses can’t expand, our tax base can’t grow and Wisconsin can’t compete with other states.”

The biggest thing people today will notice in looking at the real estate market is the lack of inventory.

“It’s never been this low, not since the ‘40s,” Didier said. “These are weird times.”

On Oct. 23, he checked the Multiple Listing Service and found only 18 houses listed in Port Washington. Of those, Didier said, 12 had accepted offers, and of the six that remained, one had not yet been built.

“That’s crazy,” he said. “In a city of 12,000 people, only six houses were on the market.

“I’ve seen this go down to zero for a week or two at a time.”

In northern Ozaukee County — from Grafton to Belgium, there were 79 houses on MLS, and of those only 24 were available, Didier said. Of those, only six were priced at less than $400,000.

“In my 28 years, I have not seen a market like this,” Didier said.

Prices are also increasing as the inventory shrinks.

“Values in our area have been going up 10% a year for the last three years,” Didier said. “If you own real estate, it’s never been worth more than it is now.”

The only segment of the market that’s not appreciating is office space, he noted.

And the increasing values are making it more difficult for people to save up for a house, Didier said.

  The price of new homes is also high, in large part because of increasing costs of materials, labor and infrastructure, Hollrith said, and that only adds to the issues in the market.

His observations are being seen by real estate agents throughout the area.

“Buyers are still out there,” Beattie said. “But the inventory isn’t what it used to be. There’s been low inventory for the last year.”

“Anything up to $500,000 that’s decent is getting an offer,” Hollrith said.

“It’s not only Port Washington, it’s Grafton, it’s Cedarburg, it’s Mequon — it’s everywhere.”

Didier said it’s not uncommon to see people writing offers for $10,000 to $20,000 more than the asking price for homes priced at or less than $400,000.

“Buyers tend to be frustrated,” he said. “It’s not unusual to go through five or 10 rejections before getting an offer accepted. There’s a lot of competition.” People are writing love letters, enclosing photos of their family, agreeing to pay the year’s property taxes — “whatever it takes to get an accepted offer,” Didier said.

Hollrith said he hasn’t seen too many people offer “way over” asking price, but said that in general homes priced at $300,000 or less will get more than the asking price and those over $300,000 will depending on the location and updates in the home.