Weak Inventory Constrains November Home Sales and Drives Up Prices
Date: December 16, 2019
MADISON, Wis. — Tight inventories continue to be the key driver of Wisconsin’s housing market, according to the most recent analysis of the existing home market by the Wisconsin REALTORS® Association. Specifically, closed sales in November were slightly below those of November 2018, falling 0.8 percent, and median prices rose 6 percent to $194,000 over that same period. On a year-to-date basis, home sales trailed the pace established in the first 11 months of 2018 by just 1.4 percent, whereas median prices increased 6.9 percent to $197,500.
“As we close in on the year-end, it’s clear that we are going to be very close to the sales levels we’ve seen the last couple of years, but the tight inventory levels have kept our growth in check,” said WRA Chairman Steve Beers. Inventory levels do fluctuate on a seasonal basis, rising during peak sales periods in the summer and then falling during the winter period. However, inventory levels peaked at 5.2 months of supply in June and July of this year, which is below the six-month benchmark that characterizes a balanced market. With November inventories falling to just four months of supply, the number of homes for sale has tightened over the past 12 months, keeping Wisconsin a seller’s market.
“The inventory problem is most pronounced in our large urban areas and homes selling at lower price points,” said Beers. The counties that comprise our metropolitan areas had just 3.3 months of supply in November compared to 6.8 months of supply in rural areas. A review of the last 12 months shows that the tightest supply levels were for homes selling between $125,000 and just under $200,000, where there were just 3.1 months of supply. “Starter homes sell quickly, so buyers and sellers need to be ready to move quickly once those homes hit the market,” Beers said.
“We’re experiencing the longest expansion in U.S. history, and it looks like it’s going to continue for a while longer,” said WRA President & CEO Michael Theo. Real GDP growth was 3.1 percent for the first quarter of the year, and it has been in the low 2 percent range for the second and third quarters. Early indication suggests that economic growth in the fourth quarter of this year will come at a pace close to the second and third quarters. “We’ve also seen some promising signs that the trade disputes with Mexico and Canada are being resolved, and that will be a welcome development for the state economy,” said Theo. The U.S.-Mexico-Canadian trade agreement is nearing ratification by Congress, which should provide some relief for our agricultural and manufacturing sectors.
“Even though home prices continue to rise at a robust pace, they were offset by improvements in income and lower mortgage rates, so our affordability has actually improved,” said Theo. Mortgage rates are down significantly, dropping from 4.87 in November of last year to 3.7 percent last month. The Wisconsin Housing Affordability Index shows that fraction of the median-priced home that the buyer with median family income can afford to purchase, assuming 20 percent down and the remaining balance financed using a 30-year fixed-rate mortgage. Overall, the Wisconsin Housing Affordability Index increased to 213 in November, up from 201 in November of last year. “There are still good opportunities out there, and the solid economy and low rates make this an ideal time to buy,” 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.