photo by John Cizmas

It was a yellow Cape Cod. Cute but quaint. Walking through the Wauwatosa home on North 65th Street, Jeremy and Sara Monty, a young married couple moving from Michigan, weren’t quite sold. The house had lots of character, with a mishmash of window types and trims, and sat on a nice, tree-lined street bordering Center Park. But maybe it was too quirky.

“There were just a bunch of things we didn’t like,” Jeremy says. The basement was too small. It had oil heat. “I was afraid the house was going to blow up,” Sara says. But two months later, still house shopping, they experienced a this-seems-awfully-familiar feeling. The yellow Cape Cod again. This time it called to them. They bought their first Milwaukee home.

Sara, a Michigan native with wavy red hair and a pleasantly sarcastic bite, prompted the relocation for her job at Build-a-Bear Workshop. Jeremy, a Time Warner account exec with glasses and a booming laugh, agreed happily. “Sure,” he said, “I can sell advertising there.” Jeremy’s gregarious, a high-volume talker. Sara’s more soft-spoken though quick to correct her husband of 10 years.

When the Montys landed in Milwaukee in 2005, real estate was booming. Credit was plentiful, people purchased property they couldn’t afford, and new homeowners banked on continued price appreciation. Others cashed in on inflated values with home-equity loans, transforming residences into personal ATMs. “People lost sight of what a home was; your home was a shelter, a place where you live, a place where you raised your family,” says Terry Donahue, president and owner of Prudential Absolute Realtors. “They started thinking of their home as their cash cow.”

A year after the metro market reached its height in 2007, the bubble unceremoniously burst. Investments withered, speculators got burned, foreclosures soared. Today, in parts of the metro area, values have declined as much as 25 percent.

Considering that nearly two-thirds of people in the four-county area are homeowners, that’s not a small issue. Homeowners worry and wonder what their homes are worth.

“Homeownership is the American dream, and it always will be,” Donahue says. “People who immigrate to this country, that’s the first thing they do. They want to buy a home.”

“Over the last decade, we opened up home buying to an awful lot of people,” says David E. Clark, Marquette University’s economics department chair. “A large number were financially able to carry the burden of the mortgage, and they’ve done well as a consequence.”

The Montys are one such example. In August 2008, the family grew with Lyla, a cheerful baby girl with blond locks and an unwavering attachment to a stuffed bunny. Immediately, their Cape Cod seemed too small. In 2009, they sold it in three days for the full list price of $209,922. Accommodating their new family of three (six with pets), they upgraded to a brown-and-white, four-bedroom “Tudor-onial,” as Sara calls it, in Brookfield.

But not everybody did that well. In Milwaukee County alone, there were 5,000 foreclosures last year. Home sales have suffered, and prices have slumped.

Of course, homeownership is about more than money. For the Montys and millions of other homeowners, four walls and a roof represent control, stability and a community support system. The house might mean a yard, a puppy and painting the walls magenta. It might simply mean adulthood. “It’s the pride of ownership,” Donahue says.

But homes are also a big investment. And often a source for home-equity loans. A change in values has major consequences. At this point, real estate agents are optimistic. The market is stabilizing, they say. And Milwaukee has always been steadier than many American cities. Rick Murry, vice president of Shorewest Realtors’ Brookfield/Waukesha office, foresees a slow, measured recovery: “The future in terms of real estate in this area is bright.”

But for the present, homeowners are keeping a watchful eye on assessments, tracking their own home against nearby sales and measuring their present against their future.

At the start of 2010, area real estate professionals gathered for a conference call. It was an autopsy, you might say, of one of the most atrocious years in history. Real estate agents, Multiple Listing Service employees and Greater Milwaukee Association of Realtors members discussed the bittersweet details of 2009.

What began as dreadful – with sales down 24 percent in January – was saved thanks to homebuyer-related tax credits. In the four-county, metro-Milwaukee area, home sales rose 6 percent over 2008, according to MLS, and were driven by increases of 34 percent and 75 percent in October and November, respectively. “Without that, we probably would have had a negative year,” says GMAR President Mike Ruzicka.

The silver lining – at first glance – is less obvious in home prices. Looking strictly at numbers, the average sales price fell from $240,552 in 2007 to $226,033 in 2008 to $200,695 in 2009. That’s a decline of 11 percent over the last year and 17 percent over the last two. In higher-priced areas with homes listed in excess of $500,000, it’s even worse. “In the last two years, we’ve maybe gone down 20 to 25 percent in price,” Murry says, who primarily focuses on Waukesha County. Ruzicka estimates a steep decline, too. “If you look at prices in 2007, we’re 25 percent less.”

Digging beneath those averages, the drop isn’t as drastic as it first appears. Average prices fell, in part, because cheaper homes made up a larger percentage of homes sold – all due to the federal government’s $8,000 tax credit for first-time homebuyers. “It has really been a driving factor,” says Judy Hearst, regional vice president for Coldwell Banker. “Under $250,000, properties are selling everywhere.”

In the past, the typical pattern was that five homes sold at the $500,000 level for every five homes sold in the $175,000 range, but last year, just one sold in the $500,000 neighborhood for every nine homes sold in the $175,000 range. “The entry-level market is back and fairly strong,” Donahue says. But higher-priced homes have largely stayed put.

Both trends had an impact on the Montys. They bought their Tosa Cape Cod for $194,000 in 2005 while the metro market was climbing. Last year, they sold it to a first-time homebuyer for $209,922. Beyond their home’s purchase price, Jeremy estimates the couple invested $15,000. “We probably broke even,” he says, but given the down market, they had expected to lose money. The Montys happily switched to buyer mode and purchased their Brookfield abode, benefitting from the slowdown in the market in that price range. “We got a house that maybe 10 years from now is worth $400,000 for $330,000,” Jeremy says.

Sales increased in Washington County last year by 0.2 percent, but the average price fell to $197,624 from just under $220,000. Average price also dropped in Ozaukee County, where sales decreased by 2.5 percent, but certain areas jumped. The small town of Thiensville, a 1-square-mile hamlet with a healthy stock of affordable ranch homes, for instance, moved 42 homes compared to 31 the year prior. Drops in upper-end sale prices and the increase in sales at the entry level pushed the average sales price down nearly $40,000. Mequon, similarly, had an increase in sales from 232 in 2008 to 245 in 2009 but a decrease in price of more than $70,000.

Even Brookfield, a multifaceted suburb with homes in various price ranges, saw a large increase in home sales (up from 392 homes sold in 2008 to 463 in 2009) but a slight decrease in price. Simply, what sold wasn’t of the McMansion variety. “Many were in the lower-tier price range, the vintage Brookfield homes that have been around awhile,” Murry says. The average price went from $302,580 to $295,409.

For all of Waukesha County, home sales fell 1.2 percent, and the cities of Waukesha, New Berlin and Menomonee Falls all saw decreases. Sales stayed the same in Oconomowoc Lake, and it remains the suburb with the highest average home price at more than $1 million. In the nearby town of Oconomowoc, sales rose as people snatched up properties that would have sold at much higher price points years ago: A glut of homes built on speculation (with no buyer ahead of time) pushed the average home price down $23,000.

A smaller factor driving down prices: Fewer companies relocated well-paid executives to this metro area in the last two years. Homes in transferee neighborhoods in Mequon, Brookfield, River Hills, Delafield and Hartland sat unsold for more than a year, says Don Chudnow, an appraiser with IRR-Residential Chudnow Druck Valuation.

Of the four counties, Milwaukee saw by far the biggest price decline. The county boasted a 9.8 percent gain in overall sales and saw double-digit percentage increases in certain months, but the average price dropped from $169,737 in 2008 to $137,324 in 2009. Here, too, the federal tax credit was a big driver. Rich with homes in the first-time homebuyer price range, the county moved inventory in areas such as Wauwatosa and Bay View. Bayside, Whitefish Bay and Greenfield saw small increases, but Fox Point, River Hills and Shorewood moved fewer homes than in 2008. Empty-nesters were expected to snatch up condos and other Downtown homes, but that didn’t happen, says Donahue.

Milwaukee’s price decline also came because of some 5,000 foreclosure filings – most of them in the city. “A concentration of foreclosures can’t do anything but depress property value,” Clark says. Hard hit was the Fond du Lac Avenue corridor between North Avenue and Capitol Drive, according to UW-Whitewater associate professor of economics Russell Kashian and UW-Extension geographic information systems state specialist Matt Kures. On a foreclosure heat map, the section is beet-red.

The houses are old, and many were poorly maintained. “A lot of the foreclosed houses in the city will never be occupied again,” Kashian says. “These are 120-year-old, wood-frame construction houses built for factory workers in the 1870s, 1880s.” That’s a lot of empty homes, but Kashian spots another silver lining. “It’s a great opportunity for the city to put in brand new housing that offers the amenities that appeal to the current buyer,” he says.

The issue spread outward from the city, too. “The foreclosure problem entered the $300,000 house market,” Kashian says, referencing Waukesha County and theorizing that some laid-off business execs could no longer afford their $350,000 homes. “It’s in that mini-McMansion area.” Only half of foreclosures reach sheriff sales, a positive for neighbors concerned with value. “If you have one or two kind of sprinkled in a neighborhood, especially if they’re not vacant, the effect will be more muted,” Clark says.

That’s good news for homeowners parked in the move-up lane, hoping to trade their home for a more deluxe option. So is the new federal tax credit of $6,500 for homeowners who’ve lived in their current home at least five years and are looking to move up. To qualify, homebuyers must enter into a contract before May 1 and close before July 1. Real estate agents expect increased activity this spring and summer as a result.

As 2009 closed, home inventory remained high, especially for properties priced above $350,000. With 19 months worth of inventory, the high-end market was nearly four times more saturated than ideal. When the market is balanced, inventory averages five to six months. But Ruzicka expects the $6,500 tax credit to change that. “Almost immediately within a week after the extension, over $250,000 saw activity,” he says. Other agents, such as Donahue and Kristin Noll-Marsh, of First Weber Group and bestmilwaukeehomes.com, are skeptical the $6,500 is incentive enough to sell and buy before July. Donahue says the time frame is too short. Either way, value increases are unlikely until the excess supply of homes in the price range is absorbed, Ruzicka says. That’s what the credit is for, he notes, much like the $8,000 absorbed a good portion of the lower-priced market.

“It seems like we’re seeing some light at the end of the tunnel economically,” Ruzicka says. “But it’s not quite time to break out the champagne.”

Nearing the end of 2009, Peter Weissenfluh, chief assessor in the city of Milwaukee Assessor’s Office, prepared a report titled “Foreclosure Sales: What is an Assessor to Do?” Presented at an annual seminar for the International Association of Assessing Officers in December, the 13-page paper and accompanying slideshow is an honest view of the profession. So honest that IAAO contacted Weissenfluh for permission to print it in its quarterly magazine. The report begins: “Something drastic happened in the Milwaukee residential real estate market in 2008. ... Whether one describes it as a bubble bursting or more of a slow but increasing release of air from a balloon, assessment jurisdictions [were] faced with the very real problem of how to deal with a market affected by increases of foreclosures.”

Appraisers and assessors estimate the numerical values of homes. Appraisers work for independent clients; assessors for the government. “Our job is really to follow the market,” Weissenfluh says. “We don’t predict values.” Chudnow works throughout the metro area. “I view my job as putting myself in the shoes of the typical buyer or seller,” he says.

Appraisers and assessors conduct research by reviewing prices of homes that recently sold. But with fewer and more scattered sales, “this past year or so has been a challenge finding truly comparable sales,” says Chudnow, a residential appraiser who has 33 years of experience. “Often, the appraisers don’t have any choice, so they have to use data [on home sales] that are further away or older. That probably detracts somewhat from the relevancy.” Milwaukee has enlarged the neighborhoods it uses to estimate prices, Weissenfluh says.

On balance, this metro area has fared well in comparison to other cities. “We’re not the metropolises of Phoenix and Los Angeles or New York City, but at the same time, there’s an element of value here that draws families here and keeps them here,” Murry says. “Milwaukee’s kind of unique,” says Ruzicka, “because it’s really easy to get around here. We have the luxury of being able to live anywhere we want.”

But market conditions have changed the way buyers value a property and sellers prepare their home for the market. Buyers, real estate agents say, want move-in ready more than ever. So sellers adjust: A fresh coat of neutral-colored paint, a new kitchen counter, updated bathroom tile, whatever the alteration, upping the price is the plan.

Recognizing the trend, the Montys made improvements to their Wauwatosa Cape Cod. When ice damaged part of the roof, they replaced it entirely. They refinished hardwood floors, improved the garage and installed new carpet. They put another $5,000 into the house to sell it by switching the laminate kitchen counter for granite tile with a granite sink, replacing the vanity counter in the bathroom and painting. Buyer’s agent Noll-Marsh suggested the changes. “She just kind of walked through and told us the things we needed to do to make the house more marketable,” Jeremy says.

Then, the Montys and Noll-Marsh began the cosmetic repositioning of household items. Sara cleaned, organized the linen closet and de-cluttered the house. Noll-Marsh rearranged furniture and staged. “[Noll-Marsh] found ways that buyers could picture themselves there,” Sara says.

In the new marketplace, homeowners can no longer treat their residences as cash cows. “Some people are challenging the long-term investment value of homes,” Murry says. But few are walking away from homeownership entirely. “The only people who are giving up on home buying are people who can’t afford it or who have been hit by the increased credit scores. It’s not that they don’t want to buy. It’s that they can’t buy.” Most Americans still see homes as a good investment.

But money isn’t the only factor. That’s one reason why location is such a key issue for homeowners. They’re concerned with the community, the school district and the kind of roots they’ll plant. “Housing satisfies so much of our basic needs,” Hearst says.

It’s about our very identity. “The kind of history every person carries with them has to do with real estate,” Hearst says. “Where are you from? Where did you live? Who do you know?” Hearst is from Milwaukee and went to Nicolet High School. Oprah sat behind her in homeroom. “There’s something so basic about where you’re raised, where your ancestors were raised, how you let that define you,” she says. “It really has a lot to do with a person’s history and identity, and that’s as old as time.”

Like Hearst, Noll-Marsh says buyers gravitate toward a neighborhood that meets their needs and lifestyle. Bohemian and hip younger couples go for Bay View, a popular area prime with first-time homebuyer potential. “They tend to like lots of charm and character; they don’t care if it’s dated,” Noll-Marsh says. Whitefish Bay hopefuls want the American dream – the master suite, three to four bedrooms, top-notch kitchen, two-and-a-half-car garage. Mequon is dreamlike but with more acreage and many “North Shore ex-pats.”

Similar to Bay View, Wauwatosa boasts homes in the first-time homebuyer price range. But they’re more cute than artsy, more Brookfield than Riverwest. Beth Jaworski of Shorewest Realtors sees increased activity on the east side of Tosa, in particular. This walkable area with good schools, parks and shopping sells well.

Ex-Wauwatosans looking for bigger yet affordable end up in Brookfield. Chatting with new neighbors, Jeremy Monty determined that five out of the seven or eight he’s met moved to Brookfield from Wauwatosa. “Every single one of them said you could find a bigger house for less money and less taxes,” he says.

The Montys’ original plan was to buy in Wauwatosa. “We really liked the location,” Sara says. “Unfortunately, we couldn’t find the right house.” Jeremy adds, “Even if we found something in Tosa for this exact price, the taxes in Tosa were almost double.” Tosa’s appeal was the community. Although the detached garage was a pain in the winter, it forced interaction. And though the home and lot were smaller, Jeremy and Sara were closer to neighbors.

In Brookfield, they sit on a larger lot and a quieter street. The winter months are desolate as residents depart for work from attached garages and duck inside for evenings and weekends spent hibernating. Even when Lyla went trick-or-treating, the street was a ghost town. Always the optimists, Jeremy and Sara think spring will bring more interaction. If not, Jeremy is the subdivision’s zone director, so he’s forcing himself into the mix. More accurately, he was nudged. The previous owner held the job, and those on the block joked it came with the house.

“The sense of community is maybe stronger in Tosa, but we’re hoping we’ll find that here eventually,” Sara says, quick to note other positives. They’re near Brookfield Christian Reformed Church, which they attend. Lyla will grow up in the desirable Elmbrook School District; she’ll walk to high school. Sara has a short drive to her job at Mayfair Mall. And Jeremy can host his annual Super Bowl/poker party in his “man cave” with a bar that rivals area establishments.

“We just really looked at everything in terms of, ‘Are we going to gain more than we’re going to lose?’ ” Jeremy explains.

The Montys decided they’d gain. Plus, they had bigger things to consider. “We bought her a house,” Sara says, holding Lyla.

Jeremy can’t help but agree. “Hopefully one day she appreciates it.”

View Market Madness Chart

Should You Buy or Rent?
“Bull, bull, bull,” grumbles real estate pro Terry Donahue, fed up with experts questioning the investment value of homeownership. “Real estate is still a sound investment.”

In the wake of the market meltdown, articles questioning the dollars and sense
of owning a home have suddenly proliferated. “If it’s not a good investment, then what is?” challenges Rick Murry, vice president of Shorewest Realtors’ Brookfield/ Waukesha office. “Are they going to flush their money down the toilet paying rent?”

Well yes, says UCLA geography professor William Clark, though without the toilet analogy. Clark, who’s done studies on home affordability, says it’s unwise to view a house as a bank that gets you a nice return. “It probably wasn’t ever a good investment,” he adds, but nowadays even those who did build equity in their home have seen values plummet. “You can probably do better renting at the moment than you can buying.”

Nonsense, counters Murry: Spend seven to 10 years in your home, and it will pay off.

Renters don’t have to pay for major repairs. Homeowners do, but they get those highly plugged tax deductions. “You can write off your interest; you can write off your property taxes,” Donahue says. But Clark isn’t sold. Tax credits may offset the costs of repairs, but the long-term appreciation of homes still lags, he contends.

Closer to home, David E. Clark (no relation to William, but those Clarks do like talking about homes) is Marquette University’s economics department chair. He views the issue this way: “If you’re buying a home for the purposes of investment, as opposed to buying a home to live in it, I think that can be a fairly risky activity.”

Clearly, homeownership is no longer a way to make a quick buck. Home flipping is a thing of the past in the metro area. But even those with homes mortgaged to the hilt or owing more than their homes are worth will see their situation improve if they can ride it out for five years, Donahue contends.

With interest rates as low as they’ve been in more than 50 years, she adds, now is the time to buy. At press time, buyers with excellent credit ratings could get a 30-year fixed mortgage with an interest rate below 5 percent. “We still have low interest rates,” Murry notes. “We have great valuations. I don’t understand why anybody who can be in the marketplace isn’t in the marketplace.”

Percentage of People Owning Homes:
Nation: 66.2%
Milwaukee County: 52.6%
Washington county: 76.0%
Ozaukee county: 76.3%
Waukesha county: 76.4%

Source: U.S. Census Bureau, 2000 (Experts say percentages are probably fairly similar today.)

Smart Selling
Although federal tax credits have helped warm up the once-chilly real estate market, this is still a buyer’s market. So sellers need to proceed wisely.

One issue that always arises is the home inspection. This is a stressful time for sellers, as an agreed-upon deal can crumble if the inspector hired by the buyer finds problems. The best way to prevent this stress is to do a pre-inspection. Pay the couple hundred dollars to hire your own inspector. Then, make all the fixes the inspector suggests. When it comes time to negotiate with a buyer, you’ll have sturdy ground to stand on with your pre-inspection certificate.

During the fix-up stage, also take a close look at small upgrades that could improve value. Think countertops, cabinets, kitchen knobs, light fixtures, floors, carpet and paint, and focus on the kitchen and master suite. Most homebuyers look for move-in ready houses. “They want it HGTV-ready,” says Terry Donahue, president and owner of Prudential Absolute Realtors, referencing the popular cable station that broadcasts a variety of home-improvement shows. “Today, time is very important.”

And while doing the fix-up, stage, stage, stage. Update the linens, rearrange the furniture, neaten the spice cabinet and clean out the closets. And don’t forget curb appeal. Power-wash the house, paint the shutters, hide the hose and plant some flowers.

Finally, use traditional (open houses) and modern (Craigslist) approaches to attract buyers, and make sure the home is priced appropriately. “Houses that are well-priced and are staged well get a lot of activity,” says Rick Murry, vice president of Shorewest Realtors’ Brookfield/Waukesha office. “In today’s marketplace, pricing is critical.”

Bargain Buying
Milwaukee doesn’t have the market highs or lows of the East and West coasts. Still, deals lurk – if you know how to look. Brokers offer this advice for bargain hunters.

Step one: Hire a knowledgeable buyer’s agent. They work directly for you (rather than the seller), finding properties, aiding in negotiations and providing uncensored views of potential homes. Best yet, their services don’t cost more than a standard agent.

Step two: Abandon obscene lowball offers; sellers are already pricing homes well. In 2009, the average home sold for 91 percent of its asking price, according to MLS.

Step three: Forget about foreclosures. “The No. 1 misconception out there is that foreclosures are a deal,” says Terry Donahue, president and owner of Prudential Absolute Realtors. They’re not in Milwaukee. “Ninety percent of them are in really rough shape in areas that aren’t as popular,” says Kristin Noll-Marsh, real estate consultant with First Weber Group and bestmilwaukeehomes.com. “You’re not going to find new construction like you would in Florida.”

The few foreclosures in desirable neighborhoods are unlikely to be a steal. “If it’s a really good bargain, a lot of people are going to bid on it, and it’s going to bring the price right back up again,” Noll-Marsh says. “There are no Black Friday sales on houses. It’s not like buying a laptop from Best Buy. You’re going to have competition.”

Step four: Consider estate sales. “Estates are generally being sold by family because the owner has gone into a nursing home or has unfortunately passed,” Noll-Marsh says, comparing estates to foreclosures. “But it’s almost the same. It’s people who just want to sell it.” Estates are typically well-maintained but often cosmetically dated. But stylistic changes are significantly better than tackling big fixes like foundation cracks and roof repairs.

Which brings us to step five: Purchasing a property with the big-ticket items (roof, furnace, central air, windows, etc.) all in good shape will save you money in the long run. Worry about personal touches and the overall aesthetic after closing. That’s the fun part anyway.

Step six: Look for vacant properties. If the house is empty, the seller is likely eager to move on. Literally, in fact, the seller has. If the family is relocating or in some kind of time crunch, you’ll get more leeway in the negotiation process. The problem with vacant properties, however, is they can appear cold and lackluster compared to beautifully staged homes. So use your imagination. “You’re going to have to be able to see past things,” Noll-Marsh says. “You really have to look at the space and how the flow is.” And keep repeating, it’s a bargain, it’s a bargain.

Benefits of a Buyer’s Agent
The running joke is that you’re signing your life away when buying a house. But it’s hardly a laughing matter. To prepare for this life-altering decision, buyers often do all kinds of homework yet bypass the best option: buyer’s agents.

The typical real estate agent works for the seller. Not only are these agents getting their commission by selling the home, but legally, they are constrained from offering buyers advice because the law looks on them as a representative of the seller. A buyer’s agent, by contrast, works for you, the buyer. These real estate professionals will scope out homes, provide uncensored evaluations of properties and price, help with negotiations on the home you select, and, perhaps most importantly, don’t cost a dime more than any other agent.

In the old days, one agent commissioned by the seller would collect the entire commission after the sale was made. With the introduction of a buyer’s agent, the parties split the commission, but the total percentage stays the same. “It wouldn’t be popular if it cost any more,” says Mike Ruzicka, president of the Greater Milwaukee Association of REALTORS.

For a while, this option wasn’t popular because few people knew buyer’s agents existed. But in 1988, the Real Estate Buyer’s Agent Council was established, and this national group established a certification process for agents. Then, their numbers began to increase. “Initially, it was slow to pick up in our market,” Ruzicka says. “Now, it’s very common.” Of the 3,567 certified real estate agents in the metro-Milwaukee area, 402 are buyer’s agents. They can be found through the Buyer’s Agent Council at rebac.net.

“I’ve been doing this for 12 years,” says Kristin Noll-Marsh, a certified buyer’s agent with First Weber Group and bestmilwaukeehomes.com. “As a buyer’s agent, I get people to look past the staging. I probably talk people out of more houses.”

Cristina Daglas is an assistant editor for Milwaukee Magazine Write to her at cristina.daglas@milwaukeemagazine.com.