New Wisconsin Realtors CEO: 'Perfect storm' market conditions will take years to address

The Wisconsin Realtors Association's newly promoted chief executive has good news and bad news for prospective buyers and sellers.

The good news: Signs of hope have emerged for buyers beleaguered by a lack of inventory and high mortgage interest rates, said Tom Larson, WRA's President and CEO.

"We're seeing signs of improvement. There's hope," Larson said.

The bad: It could take years to ramp up new home construction to the level necessary to significantly ease the current mismatch between the short supply of homes for sale and outsize demand for them, he added.

"We still have the two biggest generations we've ever had in our history competing for housing at a time when we've produced too few housing units for the last decade," Larson said. "It's kind of the perfect storm."

Larson follows Michael Theo, who retired at the end of 2023 after 39 years at WRA, the last 12 years as CEO.

Larson spoke with the USA TODAY NETWORK-Wisconsin as his promotion was announced on Jan. 17. The interview focused on market conditions buyers and sellers can expect in 2024, what it will take to build enough housing to meet demand, and what's at stake if communities do not keep up.

Wisconsin's housing market has 'regained some sanity'

In recent months, inventory improved and interest rates declined, signs Larson said the market had "regained some sanity." By that, he means buyers don't have to waive home inspections, buy sight-unseen or offer tens of thousands over asking price in order to stay competitive.

"It's happening far less frequently than it was several years ago," he said.

Mortgage interest rates on Jan. 18 reached 6.6% on a 30-year fixed-rate mortgage, down than 1% from their October peak at about 7.8%, which means buyers will pay a little less in interest in their monthly mortgage payment.

But that doesn't mean the market has reverted back to its old self, nor that inventory is anywhere close to the six months-worth that indicates a market is "balanced" between buyers and sellers.

Market conditions remain unrecognizable to buyers of yore

Larson said buying a home will remains a different experience, one that buyers who last purchased a home decades ago won't recognize or understand.

"They don't understand what it's like to not be able to find a home, to write offers on six or seven homes and not get them, to make offers over list price and not get them accepted," Larson said. "It can be mind-boggling for some people."

Residents and local governments need to understand the impact buyers' inability to find a home can have on their communities and economies.

"Every community around the state needs housing," Larson said. "They need housing to attract workers to fill the jobs."

What can home buyers do to improve their chances?

Be prepared.

Work with a mortgage broker who can help respond to changes in interest rates. Ask about down payment or other homebuyer assistance that might be available in your region to help with higher home prices.

Larson also reinforced working with a real estate agent who can help stay on top of new listings and plan accordingly.

"Do the legwork up front to get pre-qualified, know what you're looking for, be ready to go," Larson said. "It's the best way to home ownership."

What can sellers do to prepare?

Ironically, Larson said the best move sellers can take when they decide to sell is to find their next home and understand they will have to pay more in interest each month.

"It's a great seller's market, but it's a tough buyer's market. Sellers will need to become buyers and that's where the challenge is," Larson said. "Plus, many sellers locked in mortgages when rates were below 3% and now they're 6.5% or higher. It's a barrier."

What will it take for affordability, inventory to improve in Wisconsin?

A lot more new, owner-occupied housing units.

Wisconsin for a decade hasn't built enough new, single-family homes to satisfy the surge of demand from millennials and baby boomers. Wisconsin Builders Association data shows single-family home permits have increased since they reached a low of 5,362 permits in 2011, but even the 12,291 permits issued in 2020 is well below the 17,400 new homes started in 2006, just before the housing market crash.

The demand for homes won't wane, so the state needs to find ways to build more housing, especially housing affordable to middle-income families in order to make significant gains in the volume of homes buyers find for sale on the market.

Spurring construction of workforce housing is Wisconsin Realtors Association's current focus

Five housing-focused bills Gov. Tony Evers signed into law last summer should help inventory issues but won't solve them, Larson said. The legislation provides $525 million in funds to help reduce costs to build new homes, update older homes, and some housing regulatory reforms.

The funding aims to incentivize builders and developers to build "missing middle" homes, smaller houses akin to existing, older homes that might sell for $200,000 now. Larson noted 1,300 square foot homes on smaller lots don't get built without financial assistance because the cost to build such a home far exceeds the sale price.

"You need programs aimed at that (workforce housing) segment, and for housing for seniors who may want to buy (a smaller home) but can't," Larson said.

Larson said WRA's focus going forward will be to work with municipal governments to try to highlight the funding available for workforce housing development and regulatory changes towns, villages and cities can enact to spur more housing construction.

Contact Jeff Bollier at (920) 431-8387 orjbollier@gannett.com. Follow him on Twitter at @JeffBollier.