HOUSING STILL A SOLID INVESTMENT

With all the negative national news about real estate lately, it's easy to get distracted. However the reality is:

• Nationally 2007 was the fifth best year in the history of the real estate industry with over 5.92 million homes sold.¹
• Homeownership rates remain at near record levels at 69 percent nationally.²
• The Midwest has the highest homeownership rate at just under 73 percent.
• More than 97percent of prime borrowers – the bulk of the mortgage market – are up-to-date on their payments. Most foreclosures are concentrated in the once super-heated markets in California, Florida, Arizona, Nevada.³

When searching for and buying a house, keep your eye on the prize—the financial benefits of your investment! While home values have risen on an average of 6 percent annually in the US, locally we have seen higher growth.

	Percent Change in Average Home Value 4
	1990 average value	1990-2007	1990-2007 Annual Increase	2000-2007
Milwaukee County		153%	9%	65%
Waukesha County		151%	8%	48%
Ozaukee County		124%	7%	33%
Washington County		144%	8%	41%
Sheboygan County	$59,400	132%	7%	47%
Brown County	$62,600	140%	8%	36%
Outagamie County	$64,400	113%	6%	27%
Eau Claire County	$53,500	143%	8%	35%
Rock County	$65,622	88%	5%	36%

¹ National Association of Realtors
² Mortgage Bankers Association
³ National Association of Home Builders
⁴ Multiple Listing Service Inc.

LOW INTEREST RATES

Interest rates are still hovering near 30-year lows (see graph below). But waiting to time the market is a dangerous – and losing – game. Even those who follow the market for a living can’t figure out when interest rates will bottom out. Because interest rates are near historic lows, it is much more likely that they will head higher in the future as opposed to moving even lower. From 1971 to 2001 there were only 13 months where interest rates were below 7 percent. Currently rates have been fluctuating around 6 percent.

And home prices don’t necessarily move in unison with interest rates. So, if you decided to roll the dice and wait to purchase a home and the price were to actually drop $10,000 from where it is today, you could still end up losing money. How? If interest rates were to move up a half-a-point during this period, the savings on the reduced home price would be more than offset by the higher monthly payment you would be making over the life of the loan.

In short, the smartest and safest time to buy is now. We know that interest rates are low today. We know that interest rates greatly affect your mortgage and monthly payment. To learn more about the basics of mortgages, click here.

30-year fixed mortgage rates national yearly averages

THE TRUTH ABOUT FORECLOSURES

Although you have heard a lot about the foreclosures lately the truth remains that the foreclosure rate in Wisconsin is only 1%. This means that 99 our of 100 homes are in good standing. Wisconsin still has one of the lowest foreclosure rates in the country.

BUILD NOW AND DON’T MISS THIS OPPORTUNITY

As the first months of 2008 quickly come to a close, current market conditions project that the downward adjustment to housing production should complete its course by mid-2008 at the latest, if it has not happened already. This limits the time for consumers to take advantage of their money-saving opportunity as buyers.

The current market makes home buying conditions quite favorable. There are many options for buyers, mortgage rates are at historically low levels, home prices have been stable locally, household income is growing, and builders are offering a variety of sales incentives to prospective buyers. These developments improve the affordability of home buying.

It is important to note that housing has always been a cyclical business, with ups and downs. As surely as the market has slowed today, it will start picking up speed again. Although no one can accurately predict the peaks and valleys of the housing market, the built-up demand for new homes is expected to revive the housing market once again – and economists are expecting the turn-around to happen sooner than many think. Our market is experiencing signals that the market is beginning to change. Many builders report a dramatic increase in model home traffic despite the harsh winter weather.

Those who buy now will have a home they can call their own and reap the long term gains of home price appreciation instead of missing out. For example, those who purchased homes in the early 1990s during the last economic and housing downturn came out as big winners. The median price of a new home in 1991 was $120,000. In July 2007, it was $239,500 – nearly double in price. Buyers who embrace the advantage of today's current market conditions can expect to garner similar benefits in the investment of a new home.

Author Dan Kadlec described in a recent Time magazine article the benefits of buying now instead of waiting. “Consider a typical home that sells for $218,900. You put down 20% and get a 30 year fixed rate mortgage of 5.5%. Monthly principal and interest come to $994.31.” wrote Kadlec. Let's say that 12 months from now that same house goes for 10% less or $197,010. But by then the recession is history and the Fed is jacking up rates to stem inflation. If mortgage costs raise just half a point to 6%, your monthly payment would be $994.94 and you'd have saved nothing. Meanwhile, home prices might steady and sellers might become less willing to negotiate. And you have spent a year living someplace you'd rather not be.”¹

For many homeowners it's hard to understand which reports to believe regarding the housing industry. Many national reports don't apply to our market; but nevertheless articles and stories on these reports keep appearing in various media outlets. This site will address what is myth and what is reality in relation to our local market. Building in today's market means that consumers can work with homebuilders who can extend greater care, oversight, contractor readiness, availability, and process speed to their projects because of their lighter workload. Combine this with lower material costs and lower interest rates and you've got a winning combination!

¹ Time, February 25, 2008 issue, pg. 54.

TAX ADVANTAGES

There is fantastic tax incentives designed to make owning a home more affordable. Homeowners save nearly $100 billion annually on mortgage interest and property deductions alone. In most instances, all of the interest and property taxes you pay can be fully deducted from your gross income to reduce your taxable income. These deductions can result in thousands of dollars in tax savings, especially in the early years of the mortgage when interest makes up most of the payment.

SOUTHEASTERN WISCONSIN REMAINS STABLE AND GROWING HOUSING MARKET

Unemployment national is low and has been hovering around 4.6 – 4.8 percent for the last two years. This is better than all but three years in the last 30 year.¹ Locally unemployment rates in Wisconsin are currently at 4.6 percent.²

Locally our region is growing and is expected to grow. Growth of 344,800 individuals by 2035 (an 18% increase) and an additional 176,600 households in this region by 2035 (a 24% increase) are expected. As a result there will be a strong demand for housing in SE Wisconsin into the foreseeable future.³

¹ http://www.bls.gov/cps/prev_yrs.htm
² State of Wisconsin Department of Workforce Development
³ SEWRPC 2035 Land Use Plan

NEW HOMES OPERATING COSTS ARE LESS

Data from the U.S. Census Bureau's American Housing Survey suggest that operating costs per house are lowest for brand-new homes, slightly higher for relatively new existing homes but lower on average for older existing homes. Measured per square foot of living space, however, operating costs are consistently higher for progressively older existing homes. Utility costs are the largest component of operating costs. Energy consumption per square foot depends on size of the home, insulation, window quality, air leakage and efficiency of the furnace. Operating costs also include expenditures for both routine maintenance and major repairs.

Newly-built homes have become more energy-efficient over time, due to changes in building practices, standards for appliances, and other factors. Per dollar of value, energy costs will tend to be lower for newer homes simply because newer homes tend to be more efficient. Some of the reasons for that, such as higher quality products or the location in which they’re built, have nothing to do with energy consumption.

Maintenance
Routine maintenance and repairs includes items such as painting, fixing water pipes, replacing parts of major equipment such as furnaces, repairing fences, pest control, and other expenses necessary for the preventive care of property and fixed equipment.

Where differences in energy costs are likely to reflect the types of materials and equipment in the home, maintenance expenses are more likely to simply grow as a home ages, regardless of when it was built. For that reason, it’s no surprise that the newer homes have the lowest maintenance costs whether measured per house, per square foot, or as a percent of value.

YEAR BUILT 1
	Before 1970	1970-1979	1980-1989	1990-1999	After 1999	All
Cost per Square Foot
Fuels	1.03	0.88	0.81	0.72	0.66	0.92
Other utilities	0.28	0.28	0.32	0.30	0.31	0.29
Maintenance	0.36	0.31	0.32	0.20	0.09	0.31
Insurance	0.37	0.34	0.35	0.33	0.30	0.35
Taxes	1.09	0.94	1.10	1.15	1.02	1.06
Total	3.13	2.75	2.90	2.70	2.38	2.94