Wisconsin Housing Market Remains Hot in January
Date: February 17, 2020
January 2020 Home Sales Report – MADISON, Wis.
For the second straight month, robust sales of existing homes and limited statewide inventories of homes for sale drove housing prices higher, according to the most recent evaluation of the state housing market by the Wisconsin REALTORS® Association (WRA). January home sales were 8.9 percent higher than existing home sales in January 2019, and the median price rose 8.6 percent to $190,000 over that same 12-month period.
“What’s amazing is that we performed so well, in light of historically low inventory levels in January,” said WRA Chairman Steve Beers. “The WRA began tracking inventory levels in December 2009, and we set a new low mark in January,” Beers added. Specifically, the state had just 22,092 listings in January, which is down 14 percent from January 2019. “It’s not surprising to see inventories tighten in the winter, but we’ve never seen them this low, even in January,” said Beers.
By comparison, the number of homes for sale stood at more than 56,000 in January 2010, just after the economy emerged from the Great Recession. “What is truly amazing is with only 3.2 months of supply, we still managed to set a record for January home sales,” he said. More homes were sold last month than any previous January going back to 2007, when the WRA re-benchmarked its data collection methodology.
“The good economy and excellent mortgage rates have definitely boosted sales,” said WRA President & CEO Michael Theo. Unemployment rates have been inching upward but remain below 4 percent, which is the level that economists consider full employment. The Wisconsin unemployment rate stood at 3.4 percent in December. “Thirty-year fixed mortgages stood at 3.62 percent in January, which led to solid growth in every region of the state,” said Theo. The more rural Central and North regions grew at a modest pace of 4 percent to 4.8 percent over the last 12 months, whereas the Northeast, South Central and Southeast regions saw sales increase at between 7.6 percent and 8.8 percent over that period. Finally, the West region experienced the strongest growth, with January 2020 sales 24 percent higher than January 2019.
“Sales grew in spite of the weak inventories, but that creates strong pressure on prices, which has been a persistent issue for several years,” said Theo. In fact, the median price has increased at an annual rate of 5.5 percent or higher since 2016, and it grew at 7.2 percent in 2019 compared to 2018. With the general price level increasing at between 2.1 percent and 2.3 percent over the 2016-2019 period, housing prices are increasing at two to three times the rate of inflation. “Such strong price growth should be leading to lower affordability, but lower mortgage rates have kept that from happening,” he said.
The 30-year fixed-rate mortgage stood at 4.46 percent in January of last year, and it was nearly a percentage point lower at 3.62 percent last month, and as a result, housing affordability actually increased in the state. Specifically, the Wisconsin Housing Affordability Index measures the percent of the median-priced home that a buyer with median family income can afford to purchase, assuming 20 percent down and the remaining balance financed at current rates with a 30-year fixed mortgage. The index increased from 215 in January 2019 to 220 in January 2020.
Affordability will likely become a bigger concern as prices naturally increase as we move into the peak sales period in the late spring and summer. “Winter and early spring is always a great time to buy as sellers are often more motivated during those times,” said Theo. “Finding the home can be challenging when inventories are so low, so working with a REALTOR® who is experienced and knows the local market is the key to success,” he said.
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