It’s a Buyer’s Market
Residential real estate update
by Karen Erstad

The numbers tell the story, but not the whole story. Residential housing prices have been flat for about 18 months. Sales of
single-family homes and condominiums in Dane County are down, with only 898 total closings in the first quarter of 2008, compared with 1,167 in the first quarter of 2007. What the numbers don’t clearly spell out is that because of low interest rates and a large inventory, it’s actually a great time to buy.

Strong for the buyer
“I have never seen a market like this that is so strong on the side of the buyer,“ says Dan Imhoff, a 30-year market veteran and vice president and residential lending manager, State Bank of Cross Plains. Mary Browning, agent, Stark Company
Realtors, saw sellers getting multiple offers on properties this spring, because what has always been true is still true: “If you have a good house in a good location that’s been kept in good condition, and you’ve priced it appropriately, it will sell,”
says Browning. “And it will most likely sell pretty quickly.” “It’s a very strong first-time home buyer market right now,” says
Shelly Sprinkman, a Restaino & Associates Realtor, who notes that her highest-priced properties are also selling well. “The people who have the ability to invest in real estate know that the market will turn around and that prices will increase again. I do a lot of lake properties, and I see that investing more than ever on the lake. The prices have never been so good.”

The flip side
For others, the current housing market has not been quite so rosy. Foreclosures were up 26.3 percent in Wisconsin in 2007 over 2006, notes Andy Lewis and Russ Kashian in their article, “County Civil Court Data Is The Key To Understanding Foreclosure Issues,” published by the Center for Community Economic Development of the UW-Extension.
In Dane County, 819 unique properties were involved in foreclosure in 2007, say Lewis and Kashian. This is one unique case for every 257 properties in Dane County, or only 0.39 percent of the total.“So while foreclosure activity is up,” says
Dave Stark, president, Stark Company Realtors,“it is not occurring on a large enough scale to be a factor in the performance
of our market.” Foreclosures in California, through the Sunbelt to Florida and in the Northeast have caused upheaval in those markets. These areas have also experienced the greatest amount of speculation by investors, says Christian Gridley,
president, Madison Financial. “There was a lot of building, and people would buy a house and then a month later sell it and make $50,000 to $100,000 profit. It was just kind of mass hysteria, but Madison didn’t see much of that type of speculation.”
Dane County also didn’t see a lot of the subprime lending associated with many of these foreclosures. Both Imhoff and Gridley agree that subprime lending has not had a significant impact on the housing market here. However, problems caused elsewhere by subprime lending have led to tighter underwriting guidelines. But buyers can still get a mortgage, as long as they have good credit and three-percent down, or even less if they qualify based on income for down-payment assistance programs through the FHA or WHEDA. The bottom line, says Imhoff, is the cost of credit is very low right now, and
buyers in this area should not be deterred by problems in other parts of the country. While subprime lending hasn’t affected this area significantly, Browning believes the rising cost of gas is having an impact.
“When people are looking to purchase a home, proximity to jobs has become more important with the price of gas being over $4 a gallon,” she says. This could translate into fewer people looking to purchase land and homes in rural areas.

Looking forward
“The market has changed, but it hasn’t,” says Imhoff. “It’s reverting back to the prudent lending principles that took place prior to 2003. So is it harder to get financing? It’s no harder than it was 10 years ago for the same type of buyers with the same credit scores.” Imhoff believes the local market will rebound.“We’ve never had the real rash upswings or strong downturns like California and the East Coast have experienced. We’ve always experienced a steady five- to seven-percent growth in appreciation, and I think we’ll get back to that. We’ve gone through market adjustments in the past, and things will even out
and start working their way back up again.” Gridley agrees. “ Any time you have growth and the good unemployment rates we
have here, that’s typically good for housing. And as the housing inventory comes down, I predict we’re going to return to a more balanced environment in one to two years.”