Housing rebound excites local builders
JANESVILLE — Real estate agents and homebuilders have chanted a familiar refrain for years: Now is the time to buy or build.
It didn't matter whether the economy was surging, plunging or clawing its way back; they kept on singing.
“We were saying it was a good time when it was not a good time,” said Craig Rakowski, president of the Wisconsin Builders Association. “But now really is the time to buy or build, and this time we really mean it.
“That is unless you believe there will be no inflation and interest rates will drop.”
Rakowski and others aren't prepared to make that bet.
“We overaccelerated the demand,” Rakowski said, referring to the industry's role in the run-up to the nation's housing market crash. “There was money to be made. We were putting people into houses with zero down. We were selling to people who were not ready to form a home and couldn't sustain it.”
The economy tanked, and the results were predictable: New subdivisions sat empty. Mortgage defaults and foreclosures skyrocketed.
Observers say the market is slowly rebounding. Sales of existing homes—and the prices they command—are increasing, and builders are pulling more permits for single- and two-family homes.
Statewide, new home permits issued in January and February are 27 percent ahead of last year, according to Rakowski's organization, a group of more than 5,000 members from 66 local associations.
In Janesville, first-quarter permits are up 57 percent.
“Granted, last year's numbers weren't great, so the increases are relative,” said Brad Boycks, the statewide association's director of advocacy. “”But they're increases, and they're further evidence that the market is rebounding.”
Rakowski, a certified public accountant and president of James Craig Builders in Wauwatosa, said it's unlikely the state or any of its individual markets will return to the heydays of the early to mid-2000s. The economic downturn changed the landscape, and the days of irrational exuberance are gone.
“I think that if you average the wild years with the bad years, that's what's normal for our markets,” he said. “The years of 2004 to 2006 were an anomaly.
“We'll never see that again.”
The downturn caused prospective buyers and sellers to withdraw and sit on the sidelines, he said.
“People have been holding back, afraid to make a decision or an investment,” he said.
The market is stabilizing, he said, heading toward its new normal. Interest rates are not likely to remain low for much longer, and inflation will push prices higher, he predicted.
Mortgages, he said, are now often less than rents.
“If you put your house on the market right now at a fair price, it will sell,” he said, noting a dearth of homes for sale in the $100,000 to $200,000 range.
Lot prices in Rakowski's market are half of what they were a couple of years ago.
Chad Barnes, president of the South Central Wisconsin Builders Association, said the downturn forced many local contractors to change their business models or go out of business.
“It was a good lesson for us,” said Barnes, who is also the owner of Barnes Building and Remodeling in Beloit. “It forced us to look at our costs, get leaner, and the builders that got through it are better off.”
Barnes and Rakowski said remodeling continues to be a driver as the industry rebounds.
“Let's face it,” Rakowski said. “A lot of these low-end foreclosure sales are not properties that are move-in ready.
“They need work, and that's driving the remodeling business.”
Rakowski, Boycks and Barnes are excited about the rebound and the opportunities it offers buyers, sellers and builders. They noted Gov. Scott Walker recently proclaimed April as “New Homes Month.”
The construction industry is adding jobs in Wisconsin, they said.
Low interest rates and post-bubble prices that are settling back to normal make housing more affordable.
Combine that with a pent-up demand, and the builders said there is a legitimate reason for their refrain.
“This is the right time to do it,” Rakowski said.