Weak April Inventories Reduce Home Sales and Push Prices Up
Date: May 20, 2019
“We’ve been in a seller’s market for nearly two years, and if we continue to see limited homes for sale, we’ll have a hard time matching the 2018 sales levels this year,” said WRA Chairman Jean Stefaniak. Six months of supply signals a balanced housing market, and the statewide supply has been under that benchmark since June 2017. The state currently has 4.3 months of supply, which is down from the 4.6 months seen in April of last year.
“Tight supply is an ongoing problem for nearly every region of the state,” said Stefaniak. The only exception was the North region, which had 7.4 months of supply in April, down from 8.2 months a year earlier. Interestingly, that region saw the smallest reduction in sales of all regions in the state for the month of April. The Central region had five months of supply, and all other regions had supply at 4.3 months or lower. Stefaniak pointed out that the North region is primarily rural with a significant second-home market. “Rural areas have far more inventory than counties with larger towns and cities,” said Stefaniak, who noted that counties in metropolitan areas of the state had about half the inventory of rural counties. “If there is any good news on the inventory front this month, it’s that the new listings were up in April,” she said. The number of new listings in April were up 7 percent compared to April of last year. Still, the total listings in the state are down compared to where they were 12 months ago.
“With a strong economy, there is a lot of demand pressure, which continues to push prices up well above the rate of inflation,” said WRA President & CEO Michael Theo. The median price increased 8.3 percent over the past year, which is approximately four times the rate of inflation. According to the latest estimate from the U.S. Bureau of Labor Statistics, the overall annual inflation rate was 2 percent in April; and core inflation, which excludes the more volatile food and energy sectors, came in at 2.1 percent. “Statewide home prices began rising in spring 2012, and they have generally exceeded the rate of inflation for nearly that entire time,” said Theo. He noted that the annual rate of price appreciation has been 6 percent or higher for eight of the last 12 months.
“Our housing is definitely getting less affordable, and eventually this will slow demand,” said Theo. The Wisconsin Affordability Index shows that fraction of the median-priced home that a household with median family income can afford to purchase, assuming 20 percent down, and a 30-year fixed-rate mortgage on the remaining 80 percent of the balance. The index has fallen from 203 last April to 195 in April 2019, which is a decline in affordability of 3.9 percent over the last year. “We would have seen an even greater erosion of affordability were it not for the slight reduction in mortgage rates and modest increase in estimated family income levels since April 2018,” he said. “There are still good opportunities for buyers, but working with an experienced REALTOR® and being prepared to move quickly is the key to success in this tight market,” said Theo.
About the WRAThe Wisconsin REALTORS® Association is one of the largest trade associations in the state, representing over 16,400 real estate brokers, salespeople and affiliates statewide. All county figures on sales volume and median prices are compiled by the Wisconsin REALTORS® Association and are not seasonally adjusted. Median prices are only computed if the county recorded at least 10 home sales in the quarter. All data collected by the Wisconsin REALTORS® Association is subject to revision if more complete data becomes available. Beginning in June 2018, all historical sales volume and median price data from 2015 forward at the county level have been re-benchmarked using the Relitix system that accesses MLS data directly and in real-time. Data prior to January 2015 is derived from the Techmark system that also accessed MLS data directly. The Wisconsin Housing Affordability Index is updated monthly with the most recent data on median housing prices, mortgage rates and estimated median family income data for Wisconsin. Data on state foreclosure activity is compiled by Dr. Russ Kashian at the University of Wisconsin-Whitewater.
Note that the WRA employs a slightly different protocol to determine inventory levels than the protocol used by the REALTORS® Association of South Central Wisconsin (RASCW). For consistency, the summary tables for the South Central region reported in the WRA release employ the WRA approach. However, a modified table employing the RASCW methodology is available from the WRA upon request.