Lower Impact of Pandemic on June Home Sales as Economy Improves

Date: July 20, 2020

Wisconsin Housing Report — June 2020 [Source: Wisconsin REALTORS Association

MADISON, Wis. – Wisconsin’s housing market performed far better than expected in June, with existing home sales down just 4.5% compared to that same month in 2019, and median prices rose 3.6% to $222,000 over the same 12-month period, according to the most recent analysis of the state housing market by the Wisconsin REALTORS® Association (WRA). On a year-to-date basis, home sales for the first half of 2020 were 4.9% lower than the first six months of 2019, and median prices were up 7.6% to $209,900.

“This is better than we expected given the COVID-induced slide in sales we saw last month,” said WRA Chairman Steve Beers. Sales slid sharply in May, dropping 24.3% compared to May 2019, so being down just 4.5% is a big improvement. Beers qualified the comparison by noting that sales in June last year were actually somewhat weak, dropping 7.7% from June 2018. “It’s important to remember that we’re comparing closed sales with the same month a year earlier, so the weak performance in June 2019 makes this past month’s drop in sales smaller,” he said. Beers pointed out the strong pre-coronavirus start to the year helped moderate the total decline in sales in the first half of the year in all regions of the state. Comparing the first six months of 2020 with the first half of 2019, sales fell at 0.7% in the Central region, declined 1.5% in the West region, and dropped 2% in the North region. The more densely populated urban Northeast, South Central and Southeast regions saw their sales in the first half of 2020 fall between 3.9% and 7.2% relative to the first half of 2019. “The bigger cities have been hit harder by the pandemic, which may help explain these differences,” said Beers.

“It’s good to see June sales come in above our expectations,” said WRA President & CEO Michael Theo. “Improvements to the economy and a consistent decline of mortgage rates into record-low territory has definitely softened the blow from the pandemic,” he added. The state unemployment rate dropped significantly, falling from 12.1% in May to 8.5% in June. In addition, the 30-year fixed-rate mortgage dropped for the sixth straight month. The rate was at 3.62% in January and fell to 3.16% in June, which is yet another record low.

“Low mortgage rates have also kept Wisconsin housing affordable,” said Theo. The Wisconsin Housing Affordability index measures the fraction of the median-priced home that a buyer with median family income qualifies to purchase, assuming a 20 percent down payment and the remaining balance financed with a 30-year fixed-rate mortgage at current rates. Over the past 12 months, median family income dropped 4.2% and median home prices rose 3.6%, but the record-low mortgage rates have kept affordability relatively stable. The affordability index fell just 1.5% over the last 12 months.

“After massive job losses as a result of the economic lockdown in April and May, we saw a nice bounce in June,” said David Clark, Marquette University economist and consultant to the WRA. Wisconsin’s seasonally adjusted nonfarm employment rose by 104,600 total jobs between May and June, nearly all of which are in the service sector. However, this still leaves Wisconsin’s total nonfarm employment down by 294,300 jobs over the past 12 months. The economic lockdown required to contain the pandemic generated a 5% reduction in real GDP in the first quarter, and although the second quarter figures have not yet been released, projections suggest a much bigger contraction in the second quarter. “The big question is whether we see recovery in the third quarter, and on that front, economists appear to be more optimistic,” said Clark. The Survey of Professional Forecasters conducted by the Philadelphia Federal Reserve Bank suggests the economy will begin to expand in the third quarter and will continue to grow for the next four quarters. “There is still a lot of uncertainty, but at least there are some promising signals looking at the second half of 2020 and beyond,” said Clark. He noted that the state economy should continue to improve if the recession is short-lived.

“REALTORS® were among the first to effectively adapt to the challenges of COVID-19, and they continue to safely serve both buyers and sellers in this market,” said Theo. With a softer economy, there are good opportunities for buyers, especially given these record-low mortgage rates. “However, this is still a seller’s market, so buyers need to be pre-approved for financing so that they can move quickly when their REALTOR® finds the right home,” he said.

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.