UW-Madison Prof. Mark Eppli says a lack of new home lot creation is a top challenge for Wisconsin as housing demand continues to outstrip supply.
Eppli, who directs the university’s James A. Graaskamp Center for Real Estate, was the keynote speaker for yesterday’s 2024 Wisconsin Economic Forecast Luncheon in Madison. It was organized by WisPolitics, WisBusiness and the Wisconsin Bankers Association.
He noted the state’s housing inventory for sale is between 60% and 80% lower than 2016 levels, and many homeowners in Wisconsin with favorable interest rates aren’t looking to move anytime soon.
Seventy-one percent of mortgages in Wisconsin have less than a 4% interest rate, Eppli said, well below the current rates near 7%. At the same time, the average mortgage payment in the state is well below the national level, at $1,058 versus $1,358.
“Which is pretty great, okay? So we’re still a low-cost alternative,” he said.
Still, he said the state’s already tight housing market is being harshly constrained by the rate of new lot creation. Between 1994 and 2007, the state was creating about 14,000 new finished lots per year on average. Since that time, that figure has plummeted to around 3,500 per year.
This trend has been driven in part by federal regulations enacted after the Great Recession that put additional guardrails on bank lending, particularly on land loans, Eppli said.
“So those land loans are very, very hard to come by, and therefore we’re not developing enough land for new housing … We don’t have housing in the places people work,” he said.
Since the state is adding about 15,000 households per year, Eppli said Wisconsin should be creating about 10,000 or 11,000 annually to match that growth. To move toward that figure, he said “we need to somehow reduce the risk” of getting those lots developed, by having municipalities work directly together with developers.
He also referenced the Board of Commissioners of Public Lands, which he said could provide funding in lieu of bank sources to municipalities to kickstart the development process.
“The other challenge we do have though is, we have modest income in most parts of Wisconsin … those folks can only pay so much for housing,” he said. “And so that makes it difficult, so we’d have to probably — not unlike what Sheboygan’s doing — working with the corporate community to support that type of development and support housing.”
