Pandemic Slows May Home Sales
MADISON, Wis. – The severe economic consequences of COVID-19 had a significant impact on existing home sales in May, according to the Wisconsin REALTORS® Association (WRA). In its monthly analysis of home sales, the WRA found May home sales fell by 25.8% on a year-over-year basis. Median prices continued to rise at a robust pace, increasing 6.2% to $214,000 in May relative to May 2019. Comparing the first five months of 2020 to that same period last year, existing home sales slipped 5.5% and the median price rose 7.9% to $205,000.
“When the president announced the National Emergency in mid-March, followed shortly thereafter by the Safer at Home order by the governor, we expected to see home sales fall dramatically beginning in May,” said WRA Chairman Steve Beers. Regional sales in Wisconsin were remarkably consistent with five of the six regions down between 20.2% and 25.5% over the past 12 months. Only the Southeast region dropped by a slightly higher margin, falling 30.5% over the May 2019 to May 2020 period. “Home sales that closed in May were likely under contract in late March or early to mid-April, and this is the time when a lot of potential buyers and sellers decided to sit tight,” said Beers. He noted that we’re still in for a rough summer in terms of home sales, but the re-opening of the state economy should help.
“Wisconsin REALTORS® are carefully following CDC guidelines to ensure buyer and seller safety; and while inventories remain tight, there are homes available, and mortgage rates have never been better,” he said. The 30-year fixed-rate mortgage fell to 3.23% in May, which is a new record low.
“Home prices are still appreciating quickly, which isn’t surprising, given that inventories fell dramatically in May,” said WRA President & CEO Michael Theo. Statewide, there were just four months of available supply in May 2020, down from five months a year earlier. The urban regions of the state were particularly tight, with just 3.3 months of supply in metropolitan counties, suggesting a strong seller advantage. In contrast, rural counties were more balanced with 6.5 months of available inventory. “Even with decreasing supply and rapid price appreciation, Wisconsin housing is still very affordable, thanks to record-low mortgage rates,” said Theo. The Wisconsin Housing Affordability index shows the percent of the median-priced home that a qualified buyer with median family income can afford to buy, assuming a healthy 20% down payment and the balance of the home financed with a 30-year fixed-rate mortgage. The index fell just 2% from 199 in May 2019 to 195 in May 2020. “These excellent mortgage rates mean that affordability barely changed even as home prices rose and median family income fell,” said Theo.
“The longest economic expansion in U.S. history is now over, and the economy is officially in recession,” said David Clark, Marquette University economist and consultant to the WRA. The National Bureau of Economic Research recently announced that the latest recession officially began in February of this year. Statewide, the unemployment rate dropped slightly in May from the previous month. The seasonally adjusted rate dropped from 13.6% in April to 12.0% in May. “While the re-opening of the state economy has helped, we still have a long way to go to return to pre-recession levels of employment,” said Clark. Total nonfarm employment is down by more than 387,000 jobs compared to May 2019, with the biggest share of job losses in the service sector. “Recessions typically hurt the housing market when demand tails off as the recession deepens, but there are reasons to suspect less damage to markets in this recession,” said Clark. He noted that favorable mortgage rates should keep demand from falling significantly, and the aging baby-boom population will improve the supply situation over the next one to two years. “We could be returning to a more balanced market,” he said.
Theo stressed that there remain good opportunities for buyers in this market. “There’s no doubt that we still have tight housing supply in the state, but a REALTOR® who is experienced can still find the home that matches your family’s needs, and the record-low mortgage rates have kept Wisconsin housing among the most affordable in the country,” 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.