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Lots Change as Housing Market Warms Up

by Lindsie Nelson 21. May 2013 03:02

Since 2009 there has been a steady increase in annual building starts for single family homes throughout the metro-Milwaukee area. As seen in the chart below, the annual building starts have increased by close to 14% since 2009. What makes these building starts interesting is that most subdivisions built in 2012 or 2013 were fully planned and zoned years ago. Many developers had put their construction plans on a hiatus for a period of time, waiting for consumers to return to the market. Now we are seeing those plans coming to fruition at a growing rate. 

J. Scott Mathie, senior director of industry and governmental affairs at the Milwaukee Metropolitan Builders Association, said “With a lack of existing home and residential lot inventories in key markets around the region, the building industry is experiencing greater interest from consumers to build.  We are in the third straight year of building permit growth and we expect demand for new housing to continue, specifically as the overall economy improves.”  

Even though most developments being built in the last few years were previously planned, we are seeing a number of deviations from those plans. One of the greatest changes is the decreased size of the lots being approved. At one point, developers were planning for minimum lot sizes of approximately 15,000 sq. ft. and now we are seeing the minimum decreased to approximately 12,000 sq. ft. or less. This seems to be happening for a couple reasons; one is that communities are planning more homes per subdivision, and two is that developers are looking to respond to market demand for lower lot/home pricing.

Another major change in the market has been where the demand is greatest for new housing. Prior to 2008, many subdivisions were being developed in second-tier suburbs and outlying areas. This rural setting now appears to be less active and the first-tier suburbs are seeing the greatest development activity. We have recently noted this upswing in communities such as Cedarburg, Mequon, Pewaukee and Menomonee Falls. 

According to Dr. David Crowe of the National Association of Home Builders, by the end of 2014 single-family home starts are expected to be at 71% of normal levels in the market.  The housing starts statistic is considered to be a leading indicator of the future economy. If this predictor is right, then Milwaukee should prepare for a steady improvement of the local economy.

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