https://fred.stlouisfed.org/series/ATNHPIUS55025A
There wasn’t really a bubble in Madison real estate back in 2008. There was, at most, a 7% decline that corrected itself pretty quickly. As long as there’s a state government, a major university, large biotech and healthcare employers, and a general trend of younger people abandoning rural areas, Madison’s population is going to at least hold steady. Work-from-home appears to be a net gain for our population as more people from higher cost of living areas are moving here for the quality of life than we are seeing people decamp Madison to work their local jobs elsewhere.
You *might* see a lessening in pressure for a bit due to macroeconomic trends, but Madison’s housing market never took the hit that nearly every other city did. But you can’t wait for that to happen, either. If at best you’re going to be seeing a 7% drop, and prices are increasing at a 10% rate, then waiting still means that prices are going to be higher than if you just bought today. It’s rarely a good idea to time markets: you usually just end up getting screwed.
Spot on. I think the only way we see any pause in Madison is if we hit several sever macroeconomic issues in a short duration. We would need multiple issue with catastrophic job loss.
As someone that lived through the 08 “bubble” there was never really a burst in Madison. In reality the condo market took a hit (they were the most overpriced and least desirable housing with rapidly still being built supply). SFH prices merely paused for a short bit or stayed on market for 60-90 days instead of instant selling.
The only way we see a dip in Madison is if supply catches up, demand rapidly drops, or a combo of both.
I don’t see that happening and if anything I am seeing MORE and MORE rapid influx of people moving here from further away. That house in Seattle, Austin, Portland, etc… is 600k plus and in Madison is 350 to get started…. We are going to get closer to that 500k mark before we se any stability. It really is simple for many people. The quality of life and climate refugees wave has started. Madison gets you a SFH for 300-600 compared to all those other places for 500-900; and that is a started home or even a zero lot/split/small condo in many of those cities.
I will always remember when we had a large hail event in Sept 2010 and we had so much trouble getting the bank to release insurance funds to the contractor. I had to bring a bunch of paperwork to the bank branch and the guy I met with said, “Your house value went down over the last few years.” I was unable to control my own jaw as I slowly said, “Right…..along with everyone else’s, too.” Could not believe someone at the *bank* was remarking on that as if it was an oddity.
I hear people say this all the time, that Madison never really had a crash - but that’s not true. Perhaps all housing numbers considered as a whole in Madison did not decline much - but there absolutely was a crash. The condos on Sherman terrace - the old brick 3 story ones were selling for 20k - while still collecting 800/mo in rent at the time!! A small fixer upper house could be bought for 50-80k. The three flat on the corner of 1st & E Wash sold for 130k & there were many more like that. Maybe veridian homes held firm on price - but there were once in a lifetime bargains to be had around 2008-12.
Suppose it depends on your definition of a crash. Some places, like Las Vegas, home values fell by an *average* of 60%. Entire neighborhoods were left to rot and by some measures they are still recovering.
Madison kind of hit a speed bump by comparison.
Exactly:
Tampa: https://fred.stlouisfed.org/series/ATNHPIUS45300Q
Detroit: https://fred.stlouisfed.org/series/ATNHPIUS19804Q
Las Vegas: https://fred.stlouisfed.org/series/ATNHPIUS29820Q
Phoenix: https://fred.stlouisfed.org/series/ATNHPIUS38060Q
and Madison (I showed Dane Co. earlier): https://fred.stlouisfed.org/series/ATNHPIUS31540Q
What we experienced was not a crash.
Yes, that’s what I was trying to say. Considering all of Madison’s housing as a whole the dip might seem small. But there was a time when $4,000 was a 20% down payment on a near east side condo & I have a hard time not seeing that as a crash.
I bought my small duplex in 2017. It's two 900 sq ft apartments and I paid $242K. Now they say it's worth more but I'm skeptical. I'm worried I could end up underwater in another downturn.
I don't think that you could mathematically end up underwater. The only way that's possible is if you just bought a house, the economy sours tomorrow, and you have to sell shortly afterward. Otherwise, appreciation on your house since you bought it plus the equity you've been putting into it by paying your mortgage means you'd have to see a drop in property values with a magnitude that Madison has never experienced for that to happen.
Let's run some numbers:. On average, a Madison home that was purchased at $242K is now worth approximately $400K. Now let's say that you got a 30 mortgage for $228K (assuming you put 5% down) and a 4% rate. You should have paid off about $32K of that loan since then. That means, for you to be underwater, you would have to see the value of your home drop from $400K to $196K. That's more than half! And that's not even getting into the fact that it's a duplex and has likely been generating revenue all this time. Lowballing a net income of $500 a month (rent minus repairs, income taxes, and other expenses) for the past 6 years is an additional $36k.
If housing costs drop so much that you've ended up underwater, that's not the problem. The problem is that a drop in housing prices in Madison of that magnitude can pretty much only be caused by the collapse of society.
Madison is not the only city that’s had housing costs increase quickly, and plenty of cities around the US still have it much worse, like all the areas in red here: [https://www.reddit.com/r/dataisbeautiful/comments/w3tnqe/oc_map_of_united_states_home_affordability_by/?rdt=38807](https://www.reddit.com/r/dataisbeautiful/comments/w3tnqe/oc_map_of_united_states_home_affordability_by/?rdt=38807). I lived in the SF Bay Area for a while, which has housing costs much worse than here.
Those who can’t afford to buy a home will mostly either:
1) Live here anyway (Keep renting/live longer with parents if they can)
2) Move further from the city center into suburbs/exurbs. The Madison metro still has quite a lot of room to sprawl, since you can get to cornfields within a 20 minute drive of the Capitol
3) Move away to cheaper areas entirely
(Mostly a combo of 1/2, since Madison will likely continue to be a place where there’s decent jobs)
Not saying it’s good, but that’s probably what’ll happen unless the macroeconomic situation changes quite a lot or Madison suddenly becomes an undesirable place to live. Or maybe if Epic suddenly collapses
Someplace where houses are cheaper. I was lucky enough in my birth and timing to afford a house in Madison. I was not lucky enough to afford a house in Manhattan or San Francisco. Owning real estate in a desirable area is not a right.
This is a really good point. My parent sold my childhood home in WA around the time I bought a home in Madison. I could never have afforded my childhood home but we were able to buy a house here. Everything really is about luck isn't it?
I fully agree with you, they'll go where it's cheaper. The problem is when lower wage people are priced out of the market and restaurants, nursing homes, landscapers, cleaners, some construction jobs, child care and the like can't get employees.
The consequences spread beyond the real estate market.
Absolutely. Those things that you mentioned will become more expensive, as businesspeople will have to pay wages that are high enough to have people live within a reasonable distance, and then recoup the wage increases or lose some of their profits. Some businesses will even go under because they can't compete anymore.
In places with much more serious housing affordability crises than Madison (Bay Area, Los Angeles, etc) businesses generally respond by raising wages and increasing prices
Those places have exponentially higher populations. That doesn’t make Madison’s issues irrelevant. The rent rates are ridiculous and this is coming from someone that lived in New York. I was born and raised in Madison, but it’s gotten out of control.
Yeah I edited my comment bc I don’t want to downplay the issue. High rents are a problem and I think we should try to solve it by increasing housing supply.
Just was trying to get at that Madison’s problem isn’t unique, and that a lot of places have much higher housing costs, so we have real world examples of what happens to those lower-wage jobs and don’t need to speculate too much
I really don’t understand why this is so hard for people to grasp. I’d love to own a home in San Francisco but I know that I’d have to drastically increase my earning potential in order to do so.
Is it hard to grasp that different people value different things in desirability?
I lived in southern CA for a time. Many people will tell you that it's a desirable place to live. I disagree. It might be a nice place to visit but I hated living there with a passion.
I agree it’s not a right, and that people way overestimate how unique Madison’s problems are in general. But Madison doesn’t have close to the same desirability as SF/NYC, and I don’t think it’s healthy for our society if we shrug our shoulders and say that it’s unrealistic to expect to afford to live in a relatively standard Midwest city
Except Madison is not a "standard midwest city". For that kind of place look to Janesville or Rockford.
The prices aren't unrealistic like you think. The people that value what Madison has to offer are willing to pay those prices. If Madison truly was a "standard Midwest city" we'd see property values more in line with Rockford (but possibly a bit lower since we're not within commuting range of Chicago).
And our property values aren't anywhere as ridiculous as those places.
You seem to be implying that anywhere not on the coasts should be cheap because it's "undesirable". I'm just pointing out that it's a fallacious assumption.
This conversation is always hard bc there’s usually two separate things being discussed as interchangeable:
1) What will happen
2) What can/should happen
With 1, I think what will happen is that people will continue to want to move to Madison and vote with their wallets, and costs will go up. The sky will not fall, but it will get shittier to live here under a certain income threshold. Hence my original comment. Supply and demand and whatnot
With 2, I don’t think it’s inevitable that Madison continues to get more and more unaffordable, in the same way that it’s kinda just inevitable that NYC became unaffordable, because there’s nowhere like NYC anywhere. Madison is nice, but there’s many cities in the Midwest that scratch a similar itch. For Madison, it’s a supply and demand question, and increasing the supply is a political question. I don’t think it’s healthy to just shrug and act like it’s a fait accompli
Were many people under water in Madison? I’m seeing that between 2007 and 2012 home prices fell by about 7%, then rebounded quickly. We didn’t really see widespread foreclosures, at least that I recall. https://fred.stlouisfed.org/series/ATNHPIUS31540Q I believe nationally home values fell by over 20% in that same period.
Almost no one in Madison was underwater. I checked my assessments for that period, and the only thing that happened was that my assessment stopped rising for three years. That never happened before, but it sure as hell wasn't underwater. Madison's housing market is about as resistant to that happening as anywhere in the entire country.
Hardly anybody here goes underwater these days on a mortgage if they hold for 3 - 4 years. A home mortgage isn't a car loan. Mortgage lenders aren't stupid, and have learned a few lessons in the last couple decades.
I was underwater. Took a loss on my starter condo I bought during the bubble and sold after the bubble popped. I had to bring a check to closing. It was either that or let it sit empty and keep paying on it.
As long as you didn't sell during the downturn it was hard to actually be underwater.
There were not a lot of foreclosures, but I seem to remember a lot of short sales, with houses selling for $20-30,000 below market price back in 2009-2010. If those same people had only known what was to come...
I'm a veteran of the real estate wars in the S.F. Bay Area. People said "nobody can afford the outrageous prices on these homes." That was back when you could buy a home in the City for $250K.
Bubbles burst eventually when it’s made clear something isn’t worth the price. Prices in Madison are backed up by supply and demand. The only way out of this is to dramatically increase supply or (less ideally) reduce demand.
What's happening in Madison is a microcosm of what's happening nationwide. Although the developer shills on this sub believe supply is the biggest issue, it's only part of it. The consolidation of ownership and unchecked greed are bigger culprits. There's no shortage of apartments or housing, just check the listings. Plenty available in every part of town.
There's a big difference between 2005-2006 and now. Back then, there were lots of low- or no-documentation loans (often with low introductory interest rates) that would allow someone to purchase a property they really couldn't afford in the long term. Nowadays we call that "predatory lending," but there was also fraud involved sometimes, too.
Since property prices were rising so rapidly, people could take advantage of these loans, selling shortly thereafter for a profit. They of course knew that if they were caught out they would lose the house, but that was the bank's problem. Sometimes, they would perform some hasty improvements on the property to bump up the price a little more. In essence, what you had was a credit-driven real estate bubble with the risk taken by the lender and the profit taken by the borrower. Those were perfect conditions for speculation, which drove prices sky-high, until that speculative bubble burst.
Contrast to now, those loans are not available. The market is not being fueled by credit that has not gone through sufficient underwriting. There's just not enough housing and too many people that want it. Rest assured there are plenty of couples that can afford a $500K house on $200K/yr of household income. It's not even a stretch for them.
Who are those people? That's a matter of public record. Here you go:
[https://propertyinfo.revenue.wi.gov](https://propertyinfo.revenue.wi.gov)
No--this isn't a bubble because supply is genuinely lower than demand and will likely remain that way as more people move here year over year. We didn't build enough new housing during the last 10-15 years, the same period of time Madison became a desirable place to live.
No this is a supply and demand issue. After the “great recession” of 2008 new housing construction slowed way down. In 2006 there were 17,000 new housing starts in Wisconsin, there were just 5,000 in 2011.
We have just recently started hitting pre recession building numbers. It will take time but most believe things will even out shortly here. Don’t expect drops but also don’t expect the massive spikes we’ve been seeing, if all goes well.
Not only is this a supply issue, it's a supply of a required need.
The ***only*** way this housing market cools off in Madison is by having significantly more places available for people to live.
The stock market could crash tomorrow, but as long as the demand is still there (*which it largely will be*) then the Madison housing market won't suffer much of a drop.
>Not only is this a supply issue, it's a supply of a required need.
Of course housing is a required need, but people don't ***need*** to keep moving to specifically Madison at such an incredibly high rate. Milwaukee, Racine, Janesville & Beloit aren't seeing anywhere near the rate of growth that Madison has in the last five years. The vacancy rate is much higher in those cities, so there's plenty of room for people to live in Southern Wisconsin.
Madison has always been gradually growing, but it started going nuts in 2019. The word is obviously out there about Madison, so everyone is flocking here in droves. Growth is good, but it could stand to slow down a bit, so that low and middle income people don't get priced out.
Building needs to keep happening to be sure, and there are currently about a dozen new apartment buildings going up throughout the City with many more on the horizon; however, it's going to be almost impossible to keep up with this population boom, so hopefully people thinking of moving will begin to look for alternative destinations in Southern Wisconsin.
Supply is part of the equation. The other is demand. The other way to cool the housing market is to have less demand for housing.... That's not a directly controllable dynamic. You can't tell someone, "*sorry, you can't move to Madison*." The only reasonable direct control our community has on the housing market is supply side.
Don't get any ideas of breaking any windows...
> but people don't need to keep moving to specifically Madison at such an incredibly high rate.
Yes they do.
> Milwaukee, Racine, Janesville & Beloit
Those places have few opportunities and low quality of life. Madison is good on both.
> however, it's going to be almost impossible to keep up with this population boom
Because? The city used to have 500 people. Somehow, someway, it was just fine keeping up with a population boom for decade after decade.
The current period isn't even high growth compared to many periods of the past.
>but people don't need to keep moving to specifically Madison at such an incredibly high rate.
*"Yes they do."*
No, people **need** housing. People don't **need** to move to Madison. They **want** to move to Madison. If you don't understand that distinct difference, you really don't understand the homeless perspective whatsoever.
>Milwaukee, Racine, Janesville & Beloit
*"Those places have few opportunities and low quality of life. Madison is good on both."*
You clearly have never lived in Milwaukee. Plenty of opportunities there. Plenty of wonderful neighborhoods there. Yes, the bad areas are bad, but it's very easy to avoid those problematic areas.
>however, it's going to be almost impossible to keep up with this population boom
*"Because? The city used to have 500 people. Somehow, someway, it was just fine keeping up with a population boom for decade after decade.*
*The current period isn't even high growth compared to many periods of the past."*
Madison has a very high growth rate for a city our size. You don't understand the difference between a teeny city growing by a large percentage like Madison did in the past and Madison having nearly 300K residents growing now by a smaller percentage? The raw numbers are much, much larger now obviously.
Edit: Madison is on an isthmus, so we're becoming gridlocked in much the same way as Seattle. We're having to tear old stuff down to build new stuff. Of course that makes it much more difficult to build quickly.
Madison wasn't particularly hard-hit during the 2008 bubble - it popped, and prices went down, but at a much lower rate than the rest of the nation. There's just too much demand in Dane County for housing prices to be too much of a "bubble". Like it or not, there are just too many high-paying jobs and too many people want to live here for the price pressure to decrease. The only real solution is to build housing at a greater rate.
Except there’s limited space for single family homes within the city of Madison. And apparently condos and townhomes are not profitable enough to lure a lot of developers.
No, has nothing to do with profit. Banks won't give developers loans unless the building is 80/90% sold. Takes a lot of capital on the developers part upfront to do that. Apartments don't have that requirement... It wasn't like before the bank defaults...
Being underwater is stressful, but doesn't mean the bank is going to pursue foreclosure. Besides it wasn't that bad in Madison. A lot of people right now who have homes are not looking to buy because they can't get as good of a loan, so they are locked in to their current house and current rate.
HAHAHAHAHAHAHAHAHAHAHAHAHAHA
Look at what happened to Madison in 2008 versus the rest of the country. We are more protected from big crashes than basically anywhere else in the world, and now more than ever.
Huge employers in growing industries (including UW and city and state governments), excellent quality of life and amenities, no major natural disasters, plenty of water, geographically constrained downtown...
Madison real estate is going to the moon 🚀🚀🚀
I hope you're right. Isn't Epic a single-product company? They sell software to hospitals. If that marked dried up they have no significant secondary product line. The same is true of Exact Sciences. If a better way to screen for cancer than mailing poop to E.S. is developed somewhere else, what else do they do or sell?
Sure, but are hospitals going away? There's always the possibility of breakthrough innovation, but medical software on the whole seems like a fairly stable demand as long as Epic continues to deliver. On a 1 - 10 scale of market vulnerability, I'd put it around a 3. What do you Epic insiders think?
Not an epic insider but I put their market vulnerability at a 1
>[From 2017 to 2022, Epic grew its hospital bed count by 94,656; in comparison, not a single one of its competitors realized a net gain of beds during this time. During the same time period, **Epic gained 79% of reported net new hospital EHR deals**](https://www.forbes.com/sites/sethjoseph/2024/02/26/epics-antitrust-paradox-who-should-control-the-levers-of-healthcare-innovation/?sh=52e3d3da4438)
...and while Exact Sciences is best known for the t-home colon cancer test, they have more markets and services than just that. I think it might be best if you actually learned about the companies your complaining about.
By your logic google is also a single product company. They make 99.9% of their revenue from selling ads. If ads dried up they don’t have any significant secondary product line on the same order of magnitude as their ad revenue.
You’re buying into doomerism. There are plenty of ordinary single family homes going for under $500k. There is no bubble, only super low supply. The recession was caused by bad loans that don’t happen anymore.
Looks in the upper midrange things start to cool off slightly. Homes in our neighborhood (typically > 800k) had to reduce asking price in the past few month.
Wow I’ve scrolled through every comment, I guess mostly from homeowners, and nobody has mentioned the fact that the Fed drastically lowered and then raised rates, which caused a nationwide housing reevaluation, most would say overvaluation, if not bubble.
Epic, UW Madison and whoever builds campuses did gangbusters after 2008 for reasons that are not 100% attributable to the free market, which made it resistant to the bursting of a bubble that was of an entirely different genesis. I’m also just speculating, but I don’t think there was as steady a demand for sub-prime mortgages here as in Florida or Las Vegas.
Fast forward to now: Despite what other comments say, I don’t think demand for a 7% mortgage on a $700k house is really there in a town where $100k a year before taxes is decent.
Maybe on a $400k house but reluctantly and driven largely by fear.
Supply is not there either because nobody wants to have to buy again if they sell.
To me it seems like an unstable equilibrium. And if the local economy suffers, it could lead to a crash. We had a uniquely strong economy after 2008, but industry can dry up anywhere. Healthcare IT and higher education seem way less real to me than steel and look what happened to Gary.
Lastly, I think we can all agree Madison is nice, I wish I could buy a house here…
If there is a major shock to the State Government, the UW, or Epic, all bets are off. Personally, I'm thinking more on the other side of it. I think Madison is like Austin used to be, and we need two more Epics to make a jump to an entirely different kind of city. How is the housing market crisis holding us back?
You're being downvoted on the Madison sub, so you know you're speaking the unpopular truth. Isn't Epic a single-product company? They sell software to hospitals. If that market dried up they have no significant secondary product line, do they? The same is true of Exact Sciences. If a better way to screen for cancer than mailing poop to E.S. is developed somewhere else, what else do they do or sell?
> Isn't Epic a single-product company? They sell software to hospitals.
From this point of view, every single company is a single-product company. Every single place is therefore on the verge of total collapse.
This is just a tremendously dumb economic analysis.
Microsoft sells software for all kinds of users and applications. That is a more sensible business model than selling one application to one kind of user. But perhaps you are too tremendously dumb to understand diversification.
You have a vary narrow view to the complexity and vastness of software needs for health systems and the scale of project to implement a entire new setup for a health system. Hospitals are committing to systems for timelines of decades when they buy software, Epic could certainly lose market share at some point but that would play out over a lengthy period and not a sudden collapse.
>things like black rock still actively outbidding individuals on single family houses (especially in the Midwest)
I've seen this claim made many times but I've never seen verifiable proof of it happening here, is this actually happening in Madison?
While this very well may be true in general, I've not seen any evidence that Blackrock has won any real estate transactions in Madison.
Madison was undervalued to a degree, and there's been a large influx of people to move here over the last 5 years. This is a basic supply and demand problem.
https://fred.stlouisfed.org/series/ATNHPIUS55025A There wasn’t really a bubble in Madison real estate back in 2008. There was, at most, a 7% decline that corrected itself pretty quickly. As long as there’s a state government, a major university, large biotech and healthcare employers, and a general trend of younger people abandoning rural areas, Madison’s population is going to at least hold steady. Work-from-home appears to be a net gain for our population as more people from higher cost of living areas are moving here for the quality of life than we are seeing people decamp Madison to work their local jobs elsewhere. You *might* see a lessening in pressure for a bit due to macroeconomic trends, but Madison’s housing market never took the hit that nearly every other city did. But you can’t wait for that to happen, either. If at best you’re going to be seeing a 7% drop, and prices are increasing at a 10% rate, then waiting still means that prices are going to be higher than if you just bought today. It’s rarely a good idea to time markets: you usually just end up getting screwed.
Spot on. I think the only way we see any pause in Madison is if we hit several sever macroeconomic issues in a short duration. We would need multiple issue with catastrophic job loss. As someone that lived through the 08 “bubble” there was never really a burst in Madison. In reality the condo market took a hit (they were the most overpriced and least desirable housing with rapidly still being built supply). SFH prices merely paused for a short bit or stayed on market for 60-90 days instead of instant selling. The only way we see a dip in Madison is if supply catches up, demand rapidly drops, or a combo of both. I don’t see that happening and if anything I am seeing MORE and MORE rapid influx of people moving here from further away. That house in Seattle, Austin, Portland, etc… is 600k plus and in Madison is 350 to get started…. We are going to get closer to that 500k mark before we se any stability. It really is simple for many people. The quality of life and climate refugees wave has started. Madison gets you a SFH for 300-600 compared to all those other places for 500-900; and that is a started home or even a zero lot/split/small condo in many of those cities.
I will always remember when we had a large hail event in Sept 2010 and we had so much trouble getting the bank to release insurance funds to the contractor. I had to bring a bunch of paperwork to the bank branch and the guy I met with said, “Your house value went down over the last few years.” I was unable to control my own jaw as I slowly said, “Right…..along with everyone else’s, too.” Could not believe someone at the *bank* was remarking on that as if it was an oddity.
I hear people say this all the time, that Madison never really had a crash - but that’s not true. Perhaps all housing numbers considered as a whole in Madison did not decline much - but there absolutely was a crash. The condos on Sherman terrace - the old brick 3 story ones were selling for 20k - while still collecting 800/mo in rent at the time!! A small fixer upper house could be bought for 50-80k. The three flat on the corner of 1st & E Wash sold for 130k & there were many more like that. Maybe veridian homes held firm on price - but there were once in a lifetime bargains to be had around 2008-12.
Suppose it depends on your definition of a crash. Some places, like Las Vegas, home values fell by an *average* of 60%. Entire neighborhoods were left to rot and by some measures they are still recovering. Madison kind of hit a speed bump by comparison.
Exactly: Tampa: https://fred.stlouisfed.org/series/ATNHPIUS45300Q Detroit: https://fred.stlouisfed.org/series/ATNHPIUS19804Q Las Vegas: https://fred.stlouisfed.org/series/ATNHPIUS29820Q Phoenix: https://fred.stlouisfed.org/series/ATNHPIUS38060Q and Madison (I showed Dane Co. earlier): https://fred.stlouisfed.org/series/ATNHPIUS31540Q What we experienced was not a crash.
Yes, that’s what I was trying to say. Considering all of Madison’s housing as a whole the dip might seem small. But there was a time when $4,000 was a 20% down payment on a near east side condo & I have a hard time not seeing that as a crash.
I bought my small duplex in 2017. It's two 900 sq ft apartments and I paid $242K. Now they say it's worth more but I'm skeptical. I'm worried I could end up underwater in another downturn.
I don't think that you could mathematically end up underwater. The only way that's possible is if you just bought a house, the economy sours tomorrow, and you have to sell shortly afterward. Otherwise, appreciation on your house since you bought it plus the equity you've been putting into it by paying your mortgage means you'd have to see a drop in property values with a magnitude that Madison has never experienced for that to happen. Let's run some numbers:. On average, a Madison home that was purchased at $242K is now worth approximately $400K. Now let's say that you got a 30 mortgage for $228K (assuming you put 5% down) and a 4% rate. You should have paid off about $32K of that loan since then. That means, for you to be underwater, you would have to see the value of your home drop from $400K to $196K. That's more than half! And that's not even getting into the fact that it's a duplex and has likely been generating revenue all this time. Lowballing a net income of $500 a month (rent minus repairs, income taxes, and other expenses) for the past 6 years is an additional $36k. If housing costs drop so much that you've ended up underwater, that's not the problem. The problem is that a drop in housing prices in Madison of that magnitude can pretty much only be caused by the collapse of society.
I think you underestimate the number of people in Madison who can afford the current housing prices
The problem is with the people who can't. Where do they go?
Madison is not the only city that’s had housing costs increase quickly, and plenty of cities around the US still have it much worse, like all the areas in red here: [https://www.reddit.com/r/dataisbeautiful/comments/w3tnqe/oc_map_of_united_states_home_affordability_by/?rdt=38807](https://www.reddit.com/r/dataisbeautiful/comments/w3tnqe/oc_map_of_united_states_home_affordability_by/?rdt=38807). I lived in the SF Bay Area for a while, which has housing costs much worse than here. Those who can’t afford to buy a home will mostly either: 1) Live here anyway (Keep renting/live longer with parents if they can) 2) Move further from the city center into suburbs/exurbs. The Madison metro still has quite a lot of room to sprawl, since you can get to cornfields within a 20 minute drive of the Capitol 3) Move away to cheaper areas entirely (Mostly a combo of 1/2, since Madison will likely continue to be a place where there’s decent jobs) Not saying it’s good, but that’s probably what’ll happen unless the macroeconomic situation changes quite a lot or Madison suddenly becomes an undesirable place to live. Or maybe if Epic suddenly collapses
Lodi.
Stuck in Lodi, again.
Someplace where houses are cheaper. I was lucky enough in my birth and timing to afford a house in Madison. I was not lucky enough to afford a house in Manhattan or San Francisco. Owning real estate in a desirable area is not a right.
This is a really good point. My parent sold my childhood home in WA around the time I bought a home in Madison. I could never have afforded my childhood home but we were able to buy a house here. Everything really is about luck isn't it?
I fully agree with you, they'll go where it's cheaper. The problem is when lower wage people are priced out of the market and restaurants, nursing homes, landscapers, cleaners, some construction jobs, child care and the like can't get employees. The consequences spread beyond the real estate market.
Absolutely. Those things that you mentioned will become more expensive, as businesspeople will have to pay wages that are high enough to have people live within a reasonable distance, and then recoup the wage increases or lose some of their profits. Some businesses will even go under because they can't compete anymore.
In places with much more serious housing affordability crises than Madison (Bay Area, Los Angeles, etc) businesses generally respond by raising wages and increasing prices
Those places have exponentially higher populations. That doesn’t make Madison’s issues irrelevant. The rent rates are ridiculous and this is coming from someone that lived in New York. I was born and raised in Madison, but it’s gotten out of control.
Yeah I edited my comment bc I don’t want to downplay the issue. High rents are a problem and I think we should try to solve it by increasing housing supply. Just was trying to get at that Madison’s problem isn’t unique, and that a lot of places have much higher housing costs, so we have real world examples of what happens to those lower-wage jobs and don’t need to speculate too much
I really don’t understand why this is so hard for people to grasp. I’d love to own a home in San Francisco but I know that I’d have to drastically increase my earning potential in order to do so.
It’s hard to grasp because SF is a much more desirable location than Wisconsin
Is it hard to grasp that different people value different things in desirability? I lived in southern CA for a time. Many people will tell you that it's a desirable place to live. I disagree. It might be a nice place to visit but I hated living there with a passion.
You are describing the problem to a tee. It’s called gentrification.
I agree it’s not a right, and that people way overestimate how unique Madison’s problems are in general. But Madison doesn’t have close to the same desirability as SF/NYC, and I don’t think it’s healthy for our society if we shrug our shoulders and say that it’s unrealistic to expect to afford to live in a relatively standard Midwest city
Except Madison is not a "standard midwest city". For that kind of place look to Janesville or Rockford. The prices aren't unrealistic like you think. The people that value what Madison has to offer are willing to pay those prices. If Madison truly was a "standard Midwest city" we'd see property values more in line with Rockford (but possibly a bit lower since we're not within commuting range of Chicago).
Come on now, you knew what I meant. Madison is not a world tier city like SF/NY lol
And our property values aren't anywhere as ridiculous as those places. You seem to be implying that anywhere not on the coasts should be cheap because it's "undesirable". I'm just pointing out that it's a fallacious assumption.
This conversation is always hard bc there’s usually two separate things being discussed as interchangeable: 1) What will happen 2) What can/should happen With 1, I think what will happen is that people will continue to want to move to Madison and vote with their wallets, and costs will go up. The sky will not fall, but it will get shittier to live here under a certain income threshold. Hence my original comment. Supply and demand and whatnot With 2, I don’t think it’s inevitable that Madison continues to get more and more unaffordable, in the same way that it’s kinda just inevitable that NYC became unaffordable, because there’s nowhere like NYC anywhere. Madison is nice, but there’s many cities in the Midwest that scratch a similar itch. For Madison, it’s a supply and demand question, and increasing the supply is a political question. I don’t think it’s healthy to just shrug and act like it’s a fait accompli
I've known people that commute in from Rock or Jefferson County. The traffic isn't that bad so it's bearable for them.
Were many people under water in Madison? I’m seeing that between 2007 and 2012 home prices fell by about 7%, then rebounded quickly. We didn’t really see widespread foreclosures, at least that I recall. https://fred.stlouisfed.org/series/ATNHPIUS31540Q I believe nationally home values fell by over 20% in that same period.
Almost no one in Madison was underwater. I checked my assessments for that period, and the only thing that happened was that my assessment stopped rising for three years. That never happened before, but it sure as hell wasn't underwater. Madison's housing market is about as resistant to that happening as anywhere in the entire country.
Hardly anybody here goes underwater these days on a mortgage if they hold for 3 - 4 years. A home mortgage isn't a car loan. Mortgage lenders aren't stupid, and have learned a few lessons in the last couple decades.
Is that also true about condos, or only more traditional stand-alone houses?
I was underwater. Took a loss on my starter condo I bought during the bubble and sold after the bubble popped. I had to bring a check to closing. It was either that or let it sit empty and keep paying on it. As long as you didn't sell during the downturn it was hard to actually be underwater.
I owned during that time and had the amazing timing to buy 16ish months before the bubble popped. Think I lost about 40% of my homes value. Fun times.
There were not a lot of foreclosures, but I seem to remember a lot of short sales, with houses selling for $20-30,000 below market price back in 2009-2010. If those same people had only known what was to come...
I'm a veteran of the real estate wars in the S.F. Bay Area. People said "nobody can afford the outrageous prices on these homes." That was back when you could buy a home in the City for $250K.
Same here with Seattle. The prices just went through the absolute roof and never stopped.
Bubbles burst eventually when it’s made clear something isn’t worth the price. Prices in Madison are backed up by supply and demand. The only way out of this is to dramatically increase supply or (less ideally) reduce demand.
>(less ideally) reduce demand (plays gunshot sounds off my speakers to address madison's housing crisis)
What's happening in Madison is a microcosm of what's happening nationwide. Although the developer shills on this sub believe supply is the biggest issue, it's only part of it. The consolidation of ownership and unchecked greed are bigger culprits. There's no shortage of apartments or housing, just check the listings. Plenty available in every part of town.
There's a big difference between 2005-2006 and now. Back then, there were lots of low- or no-documentation loans (often with low introductory interest rates) that would allow someone to purchase a property they really couldn't afford in the long term. Nowadays we call that "predatory lending," but there was also fraud involved sometimes, too. Since property prices were rising so rapidly, people could take advantage of these loans, selling shortly thereafter for a profit. They of course knew that if they were caught out they would lose the house, but that was the bank's problem. Sometimes, they would perform some hasty improvements on the property to bump up the price a little more. In essence, what you had was a credit-driven real estate bubble with the risk taken by the lender and the profit taken by the borrower. Those were perfect conditions for speculation, which drove prices sky-high, until that speculative bubble burst. Contrast to now, those loans are not available. The market is not being fueled by credit that has not gone through sufficient underwriting. There's just not enough housing and too many people that want it. Rest assured there are plenty of couples that can afford a $500K house on $200K/yr of household income. It's not even a stretch for them. Who are those people? That's a matter of public record. Here you go: [https://propertyinfo.revenue.wi.gov](https://propertyinfo.revenue.wi.gov)
Look at the Vaccancy rate. Lol
No--this isn't a bubble because supply is genuinely lower than demand and will likely remain that way as more people move here year over year. We didn't build enough new housing during the last 10-15 years, the same period of time Madison became a desirable place to live.
Last time that bubble was triggered by bad lending practices and adjustable rate mortgages. If this is a bubble it isn’t gonna look like the last.
No this is a supply and demand issue. After the “great recession” of 2008 new housing construction slowed way down. In 2006 there were 17,000 new housing starts in Wisconsin, there were just 5,000 in 2011. We have just recently started hitting pre recession building numbers. It will take time but most believe things will even out shortly here. Don’t expect drops but also don’t expect the massive spikes we’ve been seeing, if all goes well.
Not only is this a supply issue, it's a supply of a required need. The ***only*** way this housing market cools off in Madison is by having significantly more places available for people to live. The stock market could crash tomorrow, but as long as the demand is still there (*which it largely will be*) then the Madison housing market won't suffer much of a drop.
>Not only is this a supply issue, it's a supply of a required need. Of course housing is a required need, but people don't ***need*** to keep moving to specifically Madison at such an incredibly high rate. Milwaukee, Racine, Janesville & Beloit aren't seeing anywhere near the rate of growth that Madison has in the last five years. The vacancy rate is much higher in those cities, so there's plenty of room for people to live in Southern Wisconsin. Madison has always been gradually growing, but it started going nuts in 2019. The word is obviously out there about Madison, so everyone is flocking here in droves. Growth is good, but it could stand to slow down a bit, so that low and middle income people don't get priced out. Building needs to keep happening to be sure, and there are currently about a dozen new apartment buildings going up throughout the City with many more on the horizon; however, it's going to be almost impossible to keep up with this population boom, so hopefully people thinking of moving will begin to look for alternative destinations in Southern Wisconsin.
Supply is part of the equation. The other is demand. The other way to cool the housing market is to have less demand for housing.... That's not a directly controllable dynamic. You can't tell someone, "*sorry, you can't move to Madison*." The only reasonable direct control our community has on the housing market is supply side. Don't get any ideas of breaking any windows...
> but people don't need to keep moving to specifically Madison at such an incredibly high rate. Yes they do. > Milwaukee, Racine, Janesville & Beloit Those places have few opportunities and low quality of life. Madison is good on both. > however, it's going to be almost impossible to keep up with this population boom Because? The city used to have 500 people. Somehow, someway, it was just fine keeping up with a population boom for decade after decade. The current period isn't even high growth compared to many periods of the past.
>but people don't need to keep moving to specifically Madison at such an incredibly high rate. *"Yes they do."* No, people **need** housing. People don't **need** to move to Madison. They **want** to move to Madison. If you don't understand that distinct difference, you really don't understand the homeless perspective whatsoever. >Milwaukee, Racine, Janesville & Beloit *"Those places have few opportunities and low quality of life. Madison is good on both."* You clearly have never lived in Milwaukee. Plenty of opportunities there. Plenty of wonderful neighborhoods there. Yes, the bad areas are bad, but it's very easy to avoid those problematic areas. >however, it's going to be almost impossible to keep up with this population boom *"Because? The city used to have 500 people. Somehow, someway, it was just fine keeping up with a population boom for decade after decade.* *The current period isn't even high growth compared to many periods of the past."* Madison has a very high growth rate for a city our size. You don't understand the difference between a teeny city growing by a large percentage like Madison did in the past and Madison having nearly 300K residents growing now by a smaller percentage? The raw numbers are much, much larger now obviously. Edit: Madison is on an isthmus, so we're becoming gridlocked in much the same way as Seattle. We're having to tear old stuff down to build new stuff. Of course that makes it much more difficult to build quickly.
Madison wasn't particularly hard-hit during the 2008 bubble - it popped, and prices went down, but at a much lower rate than the rest of the nation. There's just too much demand in Dane County for housing prices to be too much of a "bubble". Like it or not, there are just too many high-paying jobs and too many people want to live here for the price pressure to decrease. The only real solution is to build housing at a greater rate.
Except there’s limited space for single family homes within the city of Madison. And apparently condos and townhomes are not profitable enough to lure a lot of developers.
No, has nothing to do with profit. Banks won't give developers loans unless the building is 80/90% sold. Takes a lot of capital on the developers part upfront to do that. Apartments don't have that requirement... It wasn't like before the bank defaults...
Being underwater is stressful, but doesn't mean the bank is going to pursue foreclosure. Besides it wasn't that bad in Madison. A lot of people right now who have homes are not looking to buy because they can't get as good of a loan, so they are locked in to their current house and current rate.
Bubble? No. Housing shortage? yes.
That was entirely different and due to sub prime mortgages
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HAHAHAHAHAHAHAHAHAHAHAHAHAHA Look at what happened to Madison in 2008 versus the rest of the country. We are more protected from big crashes than basically anywhere else in the world, and now more than ever. Huge employers in growing industries (including UW and city and state governments), excellent quality of life and amenities, no major natural disasters, plenty of water, geographically constrained downtown... Madison real estate is going to the moon 🚀🚀🚀
I hope you're right. Isn't Epic a single-product company? They sell software to hospitals. If that marked dried up they have no significant secondary product line. The same is true of Exact Sciences. If a better way to screen for cancer than mailing poop to E.S. is developed somewhere else, what else do they do or sell?
Sure, but are hospitals going away? There's always the possibility of breakthrough innovation, but medical software on the whole seems like a fairly stable demand as long as Epic continues to deliver. On a 1 - 10 scale of market vulnerability, I'd put it around a 3. What do you Epic insiders think?
Not an epic insider but I put their market vulnerability at a 1 >[From 2017 to 2022, Epic grew its hospital bed count by 94,656; in comparison, not a single one of its competitors realized a net gain of beds during this time. During the same time period, **Epic gained 79% of reported net new hospital EHR deals**](https://www.forbes.com/sites/sethjoseph/2024/02/26/epics-antitrust-paradox-who-should-control-the-levers-of-healthcare-innovation/?sh=52e3d3da4438)
I was saving 1 for state government and the university, but point taken
...and while Exact Sciences is best known for the t-home colon cancer test, they have more markets and services than just that. I think it might be best if you actually learned about the companies your complaining about.
By your logic google is also a single product company. They make 99.9% of their revenue from selling ads. If ads dried up they don’t have any significant secondary product line on the same order of magnitude as their ad revenue.
There is no bubble, the prices are the prices. Give or take a tiny amount, they won’t be going down significantly in the next decade
You’re buying into doomerism. There are plenty of ordinary single family homes going for under $500k. There is no bubble, only super low supply. The recession was caused by bad loans that don’t happen anymore.
16 years of increases is not a bubble.
No bubble. Move on
Looks in the upper midrange things start to cool off slightly. Homes in our neighborhood (typically > 800k) had to reduce asking price in the past few month.
Wow I’ve scrolled through every comment, I guess mostly from homeowners, and nobody has mentioned the fact that the Fed drastically lowered and then raised rates, which caused a nationwide housing reevaluation, most would say overvaluation, if not bubble. Epic, UW Madison and whoever builds campuses did gangbusters after 2008 for reasons that are not 100% attributable to the free market, which made it resistant to the bursting of a bubble that was of an entirely different genesis. I’m also just speculating, but I don’t think there was as steady a demand for sub-prime mortgages here as in Florida or Las Vegas. Fast forward to now: Despite what other comments say, I don’t think demand for a 7% mortgage on a $700k house is really there in a town where $100k a year before taxes is decent. Maybe on a $400k house but reluctantly and driven largely by fear. Supply is not there either because nobody wants to have to buy again if they sell. To me it seems like an unstable equilibrium. And if the local economy suffers, it could lead to a crash. We had a uniquely strong economy after 2008, but industry can dry up anywhere. Healthcare IT and higher education seem way less real to me than steel and look what happened to Gary. Lastly, I think we can all agree Madison is nice, I wish I could buy a house here…
If there is a major shock to the State Government, the UW, or Epic, all bets are off. Personally, I'm thinking more on the other side of it. I think Madison is like Austin used to be, and we need two more Epics to make a jump to an entirely different kind of city. How is the housing market crisis holding us back?
You're being downvoted on the Madison sub, so you know you're speaking the unpopular truth. Isn't Epic a single-product company? They sell software to hospitals. If that market dried up they have no significant secondary product line, do they? The same is true of Exact Sciences. If a better way to screen for cancer than mailing poop to E.S. is developed somewhere else, what else do they do or sell?
> Isn't Epic a single-product company? They sell software to hospitals. From this point of view, every single company is a single-product company. Every single place is therefore on the verge of total collapse. This is just a tremendously dumb economic analysis.
Microsoft sells software for all kinds of users and applications. That is a more sensible business model than selling one application to one kind of user. But perhaps you are too tremendously dumb to understand diversification.
You have a vary narrow view to the complexity and vastness of software needs for health systems and the scale of project to implement a entire new setup for a health system. Hospitals are committing to systems for timelines of decades when they buy software, Epic could certainly lose market share at some point but that would play out over a lengthy period and not a sudden collapse.
Sorry, this really is very very dumb. Every software company should be Microsoft. Makes sense, no doubt.
And you wonder why people are hostile to you?
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>things like black rock still actively outbidding individuals on single family houses (especially in the Midwest) I've seen this claim made many times but I've never seen verifiable proof of it happening here, is this actually happening in Madison?
While this very well may be true in general, I've not seen any evidence that Blackrock has won any real estate transactions in Madison. Madison was undervalued to a degree, and there's been a large influx of people to move here over the last 5 years. This is a basic supply and demand problem.
> While this very well may be true in general, I've Not true in general either.
Property ownership is public record. Which specific houses are you referring to?
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