A Strong December Pulls 2019 Sales Even with 2018 as Prices Continue to Rise
December 2019 Home Sales Report
Date: January 20, 2020
MADISON, Wis. – Wisconsin closed 2019 on a high note in December with both home sales and median prices up by double digits on an annualized basis, according to the most recent analysis of the existing home market by the Wisconsin REALTORS® Association (WRA). Home sales increased 14.8 percent between December 2018 and December 2019, and median prices rose 10.1 percent to $197,000. This strong performance for December pulled annual sales nearly even with last year, with 2019 home sales just 0.1 percent below those of 2018. Given continued weakness in inventories, median prices rose 10.1 percent on a year-to-date basis to $197,500 for all of 2019.
“It’s important to remember that we’re comparing to a pretty weak sales performance in December 2018,” said WRA Chairman Steve Beers. In fact, sales in December 2018 were 12 percent lower than the same month in 2017. In contrast, comparing December 2019 with December 2017, sales in the state are up about 1 percent, which is just 2.2 percent below the strongest December on record, which occurred in 2016. “It’s good to finish the year strong, which put us over 82,000 sales for the fourth straight year,” said Beers. He also noted that sales were quite consistent across the various regions of the state. On a year-to-date basis, the North and Southeast regions grew between 1.1 percent and 1.3 percent, whereas the other four regions saw their sales fall slightly — between 0.3 percent and 2.7 percent.
“This economy continues to chug along, which is why sales remained steady, but tight supply continues to fuel the growth in home prices,” said WRA President & CEO Michael Theo. With unemployment rates currently in the 3.3 percent range, the state is at full employment, and this keeps demand pressure strong. Comparing 2019 with the previous year, the median price increased 7.3 percent to $197,500. This is the highest annual median price on record since the WRA modified its data collection methods in 2007. Wisconsin has been consistently classified as a seller’s market since 2017. The state had just 3.2 months of supply in December, which is well below the six-month mark that signals a balanced housing market. “The upshot is that we have too many buyers chasing too few homes, and that will continue to drive our prices up,” he said.
“Moving into a new decade, the U.S. economy continues to grow, and it looks like the trade wars are finally winding down,” said Theo. The recent signing of trade agreements with our North American neighbors and with China should keep the U.S. economy out of recession for 2020, which should keep housing demand on solid footing. However, the supply side problems will likely persist in 2020 as the three primary sources of supply show few signs of increasing supply. New construction of single-family homes has remained flat throughout most of 2019, and foreclosure activity continued to fall in 2019; note this is a good thing for the economy, but it results in lower supply. While new listings of existing homes were only down slightly in December, total listings actually fell nearly 12 percent over the last year. In the absence of an economic slowdown that softens demand, these supply trends will continue to drive prices up at well above the rate of inflation.
The silver lining has been the significant reduction in mortgage rates over the last year, which has served to keep Wisconsin housing affordable. The 30-year fixed-rate mortgage has remained below 4 percent since June of last year, and it stood at 3.72 percent in December. That compares to 4.64 percent in December 2018. “The reduction in the mortgage rate has more than countered the increase in home prices, so housing affordability has actually improved slightly,” said Theo. The Wisconsin Housing Affordability Index shows the fraction of the median-priced home that a buyer with median family income can afford to buy, assuming 20 percent down, and the remaining balance financed with a 30-year fixed-rate mortgage. The index rose from 205 in December 2019 to 210 this past December. “These are great rates, and the winter is actually a good time to buy since lower demand during those months could soften prices,” he said. Theo indicated that “working with a REALTOR® who is experienced maximizes the likelihood of success during these slower times of the year.”
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.