October 2020 Home Sales Report
Wisconsin Housing Market Continues Robust Pace in October
Date: November 23, 2020
MADISON, Wis. – Fueled by record-low mortgage rates, Wisconsin’s existing home market saw another sharp increase in sales and prices in October, according to the most recent monthly analysis conducted by the Wisconsin REALTORS® Association (WRA). For the seventh straight month, mortgage rates fell into record-low territory, with the 30-year fixed-rate mortgage dropping to 2.83% in October. As a result, existing home sales increased 24.9% in October 2020 compared to October 2019, and the median price increased 16.3% to $227,324 over that same 12-month period. On a year-to-date basis, home sales are up 4.5% relative to the sales in the first 10 months of 2019, and the median price rose to $220,000, which is an increase of 11.1% compared to the January-through-October period of 2019.
“There’s no doubt that these record-low mortgage rates are a big reason our strong sales and growth were robust in every region of the state,” said WRA Chairman Steve Beers. Home sales increased by double-digit margins in all regions, with closed sales up between 13.6% and 17.3% in the Central, Northeast and West regions. More robust sales growth was seen in the Southeast region, up 25.2%; the South Central region, up 35.2%; and the North, up 42.1%. “We would have sold even more homes if the supply was there,” said Beers. Six months of available inventory is considered to be balanced, with inventory levels below that benchmark considered a seller’s market. Every region in the state was well below the six-month level, with the North region having the most supply at 4.4 months and the South Central region the lowest at three months of available supply. Unfortunately, months of supply declined in every region over the last 12 months.
“With demand pressure so strong, buyers are moving quickly, which means homes aren’t on the market very long,” said WRA President & CEO Michael Theo. Average days on the market (DOM) follows a regular seasonal pattern, typically falling through the summer and then peaking in the winter months. Still, comparing the same month last year, DOM fell 8.8% to just 83 days statewide. In contrast, just five years ago, the October DOM peaked at 134 days, or 38.1% longer than today.
“This hot market continues to push home prices up with price appreciation in the double digits since July,” said Theo. The Wisconsin Housing Affordability Index shows the fraction of the median-priced home that a buyer with median household income qualifies to purchase, assuming 20% down and the remaining balance financed at current rates with a 30-year fixed-rate mortgage. The index fell to 199, a drop of 6.5% from October 2019. The loss in affordability would have been significantly worse had mortgage rates not dropped by nearly 1%, or down 86 basis points, over the last 12 months. “Despite our increasing prices, Wisconsin housing remains affordable compared to the national average,” said Theo. The National Association of REALTORS® reports that the national index stood at 159.6 in September, whereas the Wisconsin index was 194.8 for that same month.
“Following the wild swings in real GDP in the previous two quarters, the expectation is that the economy will once again settle into a pattern of solid growth with low inflation for 2021,” said David Clark, Marquette University economist and consultant to the WRA. The Philadelphia Federal Reserve Bank conducts the Survey of Professional Forecasters, which includes economists from business, consulting firms and academia. The latest survey projects real GDP growth of 4% and inflation of 2% for 2021. “Clearly there remains uncertainty but the prospect of an effective COVID-19 vaccine should lead to sustained growth over the foreseeable future,” said Clark.
“As we move into the winter months, buyers should remember that this can be a good time to buy as competition and prices tend to moderate,” said Theo. He points out that this continues to be a great time to buy a home. “Mortgage rates are at historic lows, which translates into lower monthly payments,” said Theo. As the economy returns to a sustained growth path, mortgage rates will likely bottom out. “Working with a REALTOR® maximizes your likelihood of success in this hot market,” 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.