MADISON, Wis. – It’s been quite a run for the Wisconsin real estate market this summer as the re-opening of the state’s economy in June combined with record-low mortgage interest rates resulted in a new three-month record in home sales, according to the most recent analysis of the state housing market by the Wisconsin REALTORS® Association (WRA). Focusing on the August 2020 market, sales rose 0.7% relative to August 2019. At the same time, tight inventories drove median prices up 14.1% to $235,000. On a year-to-date basis, existing home sales were just 1% below the first eight months of last year, and median prices rose 8.8% to $219,500.
A review of summer home sales indicates growth of 2.8% compared to the June-through-August period of 2019. Although June home sales saw a modest decline relative to that same month in 2019, very robust sales growth in July and a slight improvement in the August market pushed summer home sales to 27,795, which is the strongest summer sales volume on record for the state.
“We’ve seen remarkable resilience in this market, given the strong headwinds we faced this year,” said WRA Chairman Steve Beers, noting low inventories have kept the state in a strong seller’s market for the last three years, which has limited buying opportunities. Moreover, the recent COVID-induced recession effectively shut down the housing market in the latter part of the spring. “The good news is that mortgage rates have never been lower,” said Beers. The 30-year fixed-rate mortgage continued its downward trend, falling to 2.94% in August, setting a new record low for the fifth straight month, and that has really fueled housing demand.
Not surprisingly, the strongest regional home sales in Wisconsin were seen in the North region, which is more rural. Rural regions generally have more available inventory compared to urban regions of the state. The North region had 5.9 months of supply in August, and sales were up 16.5% over August 2019. The Central region had sales up 5% with 4.1 months of supply. In contrast, the more densely populated counties in the Northeast, Southeast and South Central regions had between 3.5 and 3.9 months of supply, and their home sales were relatively flat over the past 12 months. “These regional differences also show up in measures of time on the market,” said Beers.
Homes in the North region were on the market an average of 130 days in August, and they averaged 103 days in the Central region. By comparison, they averaged between 72 and 93 days on the market in the other regions of the state. “The clear takeaway is that if you are looking for a home in the northern and central part of the state, you have some options, but if you want to find a home in the bigger cities, you better be ready to move quickly,” he said.
“Tight supply and strong demand have really driven our home prices up,” said WRA President & CEO Michael Theo. The median price in August spiked up 14.1% over the last 12 months, and the median price for the first eight months of 2020 increased 8.8% compared to that same period last year. “The low mortgage rates have been our salvation on the affordability front,” said Theo. Affordability fell 7.8% in August, compared to its level a year earlier. “Still, Wisconsin housing will remain affordable as long as mortgage rates remain low,” said Theo. He also pointed out that new construction has improved in 2020, which is a promising sign. Through July, single- family housing units authorized by building permits were up 9.3% over the first seven months of 2019. “Hopefully this trend will continue and help to eventually ease the supply problem in the state,” said Theo.
“The national economy appears to be on a solid growth path in the third quarter, according to the New York Fed, and this has helped improve the labor market,” said David Clark, Marquette University economist and consultant to the WRA. The New York Fed’s predictions of the annual pace of real GDP growth indicated third-quarter growth of 15.6%. This has been a driver of labor market growth as the number of unemployed in the U.S. dropped by 2.8 million persons in August, lowering the national unemployment rate by 1.8 percentage points to a seasonally adjusted 8.4%, according to the U.S. Bureau of Labor Statistics. “We’re still well above the pre-recession unemployment rate of 3.6% in January, but it’s important to note that the rate spiked to 14.7% in April, so we’ve made up a lot of ground in just four months,” said Clark. He noted that the Fed’s commitment to keep short-term interest rates near zero for the next three years should continue to stimulate housing market demand.
“Low mortgage rates will also keep housing affordable, which serves the Millennial generation well as it shifts to owner-occupied housing,” said Theo. He pointed out that consulting with a REALTOR® who is experienced is critical in a tight market with strong demand. “There is often a short window between finding the home that meets your needs and closing the deal with the seller, and a REALTOR® will help you successfully navigate the buying process,” said Theo.