Ahead of Foxconn, Racine County’s housing market is on fire

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Racine County’s housing market was heating up even before Foxconn Technology Group announced plans for a $10 billion factory there.

But as work on the massive Foxconn factory begins, Racine County‘s real estate industry is watching home and land prices set records while builders scramble to break ground on new housing despite rising materials prices and a labor shortage.

And it’s all happening before any of the 13,000 employees expected to work at the Foxconn plant even begin to buy houses.

“What’s happening is going to transform Racine,” said Ray Leffler, owner of Racine’s Newport Development Corp. “I think it’s going to be an unbelievable experience.”

“I wish I was younger,” he added with a laugh.

In March, the National Association of Realtors ranked Racine County as the seventh-hottest housing market in the country, behind places such as Boston, San Francisco and Colorado Springs, Colorado. Racine County jumped 28 spots on the list that month, the largest shift seen in any market. In hot housing markets like these, homes are selling between 17 and 40 days faster than in the rest of the country.

One upshot has been a rapid increase in house prices in Racine County, according to data from the Wisconsin Realtors Association. The median sale price rose to $167,520 in April, from $141,000 in 2016.

Short supply

Leffler said he and other developers are selling lots they snapped up after the recession. That supply, he calculates, will last about two years. But Racine County already had a shortage of lots ripe for development before Foxconn announced its intentions to build there.

Racine County officials are worried a lack of housing near the manufacturing campus will force Foxconn workers to drive an hour or more to get to work, Leffler said. So they find themselves preparing to take steps to encourage the construction of apartments, condos and other multifamily units, work that will most likely require local governments to change their land-use rules.

“Right now you have to have developers that got crushed at the downturn and now have to put product in that’s twice as expensive,” Leffler said. “The margins are very tight. It’s not a very profitable business to be a developer of strictly land. They only way to offset that is to have prices go up dramatically.”

Dan McHugh, village assessor for the village of Mount Pleasant, said the shortage of homes was aggravated by a lack of subdivision and multifamily projects in the past 10 years.

When McHugh joined the village of Mount Pleasant eight years ago after working in Beloit, he thought he’d never again see a housing market as hyperactive as it was before the Great Recession.

He’s not quite so ready to make the same prediction now.

“I was born in the early ’70s when you saw a huge inflationary cycle,” McHugh said. “I think we’re about to enter something like that again.”

Residential-property assessments in the village of Mount Pleasant have increased by 10 percent between 2017 and 2018, McHugh said. He expects his office will see an even larger increase next year.

Construction crunch

Amid all the home sales, builders are facing headwinds that could make new construction cost both more time and money.

Patti Beaudin, owner of Perma Structo, a Sturtevant-based firm that builds foundations, said her non-union company has struggled to attract the workers needed for building projects. Construction prices have also been rising.

The federal Bureau of Labor Statistic’s producer-price index for inputs to the construction industry rose by 1 percent in April alone and by 6.4 percent over last year — the steepest increase seen since 2011. As for particular materials’ prices, concrete products’ rose by 4.9 percent year-over-year in April and lumber and plywood products’ by 11 percent.

Trade disputes were in part to blame.

“It’s going to put a stress on our market,” Beaudin said. “Prices are rising pretty fast. My concrete has gone up. Rebar has pretty much doubled. Lumber has gone up and is rising constantly.”

Wisconsin’s festering labor shortage will also make it tougher to build new houses, said Michelle Dawson, executive officer at the Racine Kenosha Builders Association. And it’s not just the people working in the Foxconn factory who will have to be housed. Building the plant will require the labor of 10,000 workers, at least some of whom are going to have to move to southeast Wisconsin from elsewhere and thus will at least need temporary housing.

In the meantime, home building companies are doing their best to stay ahead, Dawson said.

“Right now (home builders) are punting,” Dawson said. “They are making do with what they have.” Follow @natebeck9