Record July Home Sales Push Prices Up
Date: August 17, 2020
MADISON, Wis. – Wisconsin’s existing home sales hit a new record for the month of July, which increased prices by double digits, according to the most recent monthly analysis of the state housing market by the Wisconsin REALTORS® Association (WRA). Sales of existing homes rose 7.6% in July relative to that same month in 2019, and the median price rose to $226,400, which is 10.4% higher than July 2019. On a year-to-date basis, sales are now only slightly lower than this time last year, with sales in the first seven months of 2020 just 1.9% below the same period of 2019, and prices are up 8.4% to $213,000.
“July was a remarkably robust month for home sales, given what we’ve been through the past four months,” said WRA Chairman Steve Beers. A total of 9,649 homes were sold in July, the most homes sold during a July since the WRA re-benchmarked its data-collection methods in 2005. The previous record was July 2019, when 8,969 home sales closed. “What makes this record even more impressive is that it happened in an environment of extraordinarily tight inventories,” said Beers. There were just four months of available supply in July, which is well below the six-month level that indicates a balanced market. “We’ve been in a seller’s market for almost three years,” he said. While every region of the state saw increases in sales, the strongest growth was in less-urbanized areas. Over the last 12 months, home sales were up 18.6% in the North region, and they rose 11.1% and 11.7% in the Central and West regions, respectively. “This makes sense because rural areas have higher inventory levels,” said Beers. Statewide, rural counties had 6.4 months of available supply in July, compared to just 3.4 months of supply in the metropolitan counties.
“We had record home sales because we had record-low mortgage rates,” said WRA President & CEO Michael Theo. This was the fourth straight month where the 30-year fixed mortgage rate dipped into record-low territory, falling to 3.02% in July. By comparison, mortgage rates were at 3.77% just a year ago, so they have fallen three quarters of a percent. “Wisconsin’s home prices were up over 10% over the last year, yet affordability only dropped 4.5% over the period,” said Theo. The Wisconsin Housing Affordability index shows the percent of the statewide median-priced home that a buyer with median family income qualifies to purchase assuming a healthy 20% down payment and the remaining balance financed with a 30-year fixed-rate mortgage at current rates. The index stood at 193, which means that buyer qualifies to purchase 193% of the median-priced home.
Theo noted that even though Wisconsin home prices have been appreciating quickly on an annual basis, home prices are still well below national levels. The median price of a home in the U.S. in June was $298,600, which is the latest available data from the National Association of REALTORS®. By comparison, the Wisconsin median price in June was just $222,500. “Your income buys a lot more home in Wisconsin than in other areas of the country,” said Theo.
“We just had the biggest quarterly contraction in U.S. history,” said David Clark, Marquette University economist and consultant to the WRA. The advance estimate of real GDP, a measure of inflation-adjusted national output, dropped 32.9% in the second quarter, relative to the first quarter of the year. “While this is a shocking figure, it’s not surprising given the economic lockdown intended to control the pandemic,” said Clark. He notes that there will be mixed economic signals in the months ahead, but he expects improvement in the second half of the year. “Consumer confidence fell in July due in part to the resurgence of COVID-19 in some regions of the country, but nationally, workers continue to return to work,” he said. In August, initial claims for unemployment in the U.S. fell below 1 million for the first time since the national emergency was declared in March. “This trend in the labor market should continue now that the federal $600 enhancement to weekly unemployment benefits has expired, and that should help alleviate some of the labor shortages that emerged in the summer,” said Clark.
“We can’t expect record sales every month especially given the supply crunch, but these record-low mortgage rates will fuel the demand side for the late summer and fall sales season,” said Theo. He noted that this is a great time for sellers to list their homes. “REALTORS® are moving homes quickly in this hot market, often at or above the listing price,” said Theo. “We expect that to continue the next few months assuming mortgage rates remain low, so this is an ideal time to work with a REALTOR® who is experienced to sell your home,” he said.
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.