U.S. Housing Market Conditions, First Quarter 2003: National Data

Milwaukee, Wisconsin
The Milwaukee metropolitan area consists of Milwaukee, Ozaukee, Washington, and Waukesha Counties. Although the city of Milwaukee continues to lose population, the remainder of the metropolitan area has shown steady growth since 1990. Between 1990 and 2000 population in the metropolitan area increased by 68,600 to 1.5 million. Waukesha County led the area in population growth with an increase of 56,000 residents. Waukesha is one of the fastest growing counties in the state, trailing only Dane County, where Madison is located. Suburban Milwaukee County also registered population growth during the decade of 12,000. Between the 2000 Census and January 2002 population of the metropolitan area increased by 13,000. The population in the city of Milwaukee declined 31,000 during the past decade, and since the 2000 Census it has continued to lose population, although at a much slower rate.

Between 1990 and 2000 employment in the metropolitan area grew by 11,000 jobs annually, much of which was in the services sector. Since 2000 the metropolitan area has lost 27,000 jobs, three-quarters of which were in the goods-producing sectors. Nonfarm wage and salary employment declined by 5,900 jobs, or 0.7 percent, in the 12-month period ending in February 2003 compared with a 3.3-percent decline in the previous 12-month period.

Single-family building permit activity in the metropolitan area has been relatively steady during the past 13 years. Activity from 2000 to 2002 averaged 3,500 homes annually compared with 3,800 annually during the previous 3 years and 3,900 units from 1990 to 1999. In the first quarter of 2003 single-family building permits were issued for 836 units, up 13 percent from the same period in 2003. Permit activity in the first 3 months would have been higher were it not for the cold winter with little snow cover, which caused the frost line to extend much deeper than normal. As a result some builders have postponed obtaining permits until warmer weather. More than half of the single-family permits issued since 2000 in the metropolitan area were for homes in Waukesha County.

According to the Milwaukee MLS, sales of new and existing homes in the first quarter of 2003 were on pace to exceed record sales in 2002. The entry-level market, driven by low mortgage interest rates, is pushing the area’s sales market to possibly its 12th consecutive year of growth. Conditions are tight as supplies become limited. With the number of first-time buyers exceeding the supply of homes available, homes are not on the market long and multiple bids are becoming common. During the first 3 months of 2003 home sales totaled 3,600 compared with 3,300 for the same period in 2002, an increase of 8 percent. Nearly 60 percent of the resales were in Milwaukee County and 25 percent were in Waukesha. The market for homes in the upper price ranges is much softer. Homes priced over $500,000 are taking much longer to sell and are showing less appreciation than those in the lower price ranges. The Milwaukee area’s average sales price for new and existing homes was $177,200 in the first quarter of 2003.

The metropolitan rental market is soft due in large part to low mortgage interest rates, which have encouraged many renters to buy single-family homes and condominiums, as well as the slowing economy. Conditions have not changed appreciably during the past 9 months. Local sources estimate the overall rental vacancy rate is currently close to 9 percent compared with 5.5 percent as of the 2000 Census. Over the past year, rents have been flat and concessions have become more common. To attract tenants recently built high-end projects are offering 1 or more months’ free rent, whereas older projects tend to have more modest incentives such as free cable television. The downtown Milwaukee rental market has softened a bit in the first quarter of 2003 due to the recent construction of condominium projects that compete with rentals. Newer projects in the metropolitan area with one-bedroom rents in the $800–$1,000 range are also having occupancy problems. However, some areas in the city are doing well, such as the east side of Milwaukee, which has many one-bedroom units renting for $600 a month or less and an estimated vacancy rate of 5 percent.

Multifamily permit activity in the Milwaukee metropolitan area in 2002 was up 17 percent to 2,700 units compared with 2,300 units in 2001. The increased permit activity was driven by low interest rates and a boom in downtown and suburban condominium development. Activity in the first 3 months of 2003 increased by 1 percent to 808 units. The condominium market remains strong, and projects proposed in 2002 are going ahead with construction. Very few condominium projects were announced in the fourth quarter of 2002. Apartment construction in 2003 is expected to be weak due to vacancy problems in newer high-end projects, increasing development costs, competition from the condominium and single-family sales markets, and a weak national economy.

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