Milwaukee market home values

[Marcus Auerbach]

Some personal thoughts and opinions about property values I have as an Investor and Realtor I thought I could share.

Home prices will continue to rise nationally and Milwaukee, Wisconsin will be no exception as far as I am concerned. I am especially optimistic for the segement below $300k, because builders focus on more expensive projects, in particular $300-500k. Out of 550 homes built and sold in greater Milwaukee 400 are in that over 300k category. More homes were built for $500k+ than for under $250k (just 39).

New construction starts remain still well below historical norms, meanwhile the improving economy keeps driving demand - and prices. This will continue until supply starts to chatch up with demand. Given the shortage of qualified contractors and trades it might take a while for the gap to close. The only question for me is how much will home values go up in the next 5 years. Here is what 114 experts think:

What does that mean for investors? If you hold SF properties in the 100-250k range in Milwaukee or the surrounding suburbs you should reasonably expect some good appreciation over the next years (on top of you cash flow!). Short of a global political cristis or a monetary system issue we should be in good shape: lending standards are still very strict (compared to pre 2008), but have eased up enough to allow for a growing market. 

Virtually all SF properties sold in Milwaukee under 250k are not new. There is no new SF construvtion under 250k! Demand for fully remodelled homes in this price range is high; well done flips usually receive multiple offers over asking within the first days and are hard to get (I know, because I usually represent a buyer in these transactions). As an investor, if you hold properties in Milwaukee valued under 75-100k you will most likely not see the same rate of appreciation. While many of the suburbs have keep going up in double digits every year, home values in the inner city have remained flat over the last years and I see no indication for a change. Investors should consider to trade up and out into better areas or the suburbs and find a good blend of cash flow and appreciation potential.

Would love to hear everyone's thoughts on this!

[Marcus Auerbach]

@Michael Henry I am in agreement with the old school guys like Dolf DeRoos: seldom sell. You have heard seasoned investors say this on the podcast: they regret every property they have ever sold. (Obviously, there are circumstances that suggest to exit a property - other than to cash out - and those provide valid reasons.)

I think SFR under 250k are like bitcoin - there is a finite amount, they cannot be made anymore.

That's worth thinking about: 

It's not possible to build a SFR under 250k in Milwaukee. Cost of land, labor and material is too high. You have to buy 1960's labor and materials. Anything that has limited supply and strong demand will go up in value. In this context, here is one mistake that I see investors make over and over again, they focus on price and don't put it in connection with square footage. Small homes are not very popular and that will get worse. People don't want 9x10 bedrooms.1200-1500 is usually a good size for a rental.

I am not planning on selling properties, regardless what the market does. I am planning on a full remodel in 20-30 years from now, but by then appreciation and principal pay down will have done their job. And rent will have seen some good inflation. I think it's the best to hold on, manage, maintain and plan to refinance at some point to liquefy some of the equity that has grown over time.