Wisconsin home sales drop in July while economist sees positive signs
A lack of homes for sale in Wisconsin continues to push home sales volumes down and prices up, but inventory woes have started to ease up in rural parts of the state.
Existing home sales dropped 20.8% to 6,278 in July 2023 and are down 23.6% to 34,698 in the first seven months of the year, according to sales data the Wisconsin Realtors Association released Thursday. The median sale price topped $300,000 in July, a 7.5% increase from July 2022.
The few options, rising prices and higher interest rates continue to make it difficult for the large pool of buyers to find, let alone afford a home. Dave Clark, an economist who consults with WRA, expects those conditions to persist into 2024, making it more difficult for younger homebuyers.
“Unfortunately, the affordability issue is probably going to hinder our sales volume for the next year or so, at least,” Clark said. “We’re starting to see a little improvement in the inventory situation in smaller cities and rural areas. That ought to move us more quickly towards a normalizing market.”
Inventory increases in Northern Wisconsin, remains low in Milwaukee and other metro areas
Inventory, measured in months, gauges the number of homes for sale at a given time divided by the average number of home sales a market or region records. Inventory helps determine whether the housing market favors buyers (more than six months of inventory), sellers (less than six months) or is balanced (right around six months).
Conditions in Wisconsin continue to favor sellers with a lot more home buyers looking than homes for sale. Statewide, there’s a little more than three months of inventory with major metro areas like Milwaukee, Madison and Green Bay all below three months of inventory. Inventory woes also persist in price ranges affordable to more working families, with only 2.3 months of homes for sale statewide in the $125,000 to $200,000 price range.
There is a bright spot, though: Rural counties in Wisconsin reported saw inventories increase to 4.8 months, led by the 17-county northern Wisconsin region, which in July saw inventory increase 16.3% to five months. Clark said typically rural inventories are about double the inventory of metro areas.
The increases, along with moderating median purchase prices in north and western Wisconsin, could indicate the beginnings of a slow movement toward a more balanced market, he said.
“We’re starting to see a little improvement in the inventory situation in smaller cities and rural areas,” Clark said. “That ought to move us more quickly towards a normalizing type of market.”
Still, Clark said a balanced market and relief for homebuyers will take time.
“Don’t expect it to happen quickly,” Clark said.
Mortgage interest rates set new highs, continue to hamper affordability
The average interest rate for 15- and 30-year, fixed-rate mortgages rose to their highest levels in a year in August, beating the prior highs of 6.38% and 7.08%, respectively, set in early November 2022.
The average interest rate on 15- and 30-year fixed-rate mortgages on Aug. 17 were 6.46% and 7.09%, respectively, according to mortgage lender Freddie Mac. The lender said it is the highest rate in 20 years.
For comparison, one year ago, the 15-year rate was 4.85% and the 30-year rate 5.55%.
Clark said rising interest rates increase the costs homebuyers pay to borrow money. The more they pay in interest, the less they can afford to pay for the house itself. As interest rates continue to inch up, “affordability is hurt” as a consequence.
Green Bay, Appleton region records highest increases to home sales prices
July was the second straight month Wisconsin’s median home purchase price topped $300,000 and median prices continue to increase in metro areas like Milwaukee, Madison and Kenosha.
WRA’s 14-county northeast Wisconsin region in July saw the highest median purchase price increase of any region of the state. The median purchase price increased 14.6% to $275,000. For the year, northeastern Wisconsin’s median price has increased 10.6% from $235,000 in July 2022 to $260,000 last month.
The northern and western regions of the state, in contrast, saw median prices moderate. The 17-county north Wisconsin region saw no change in the median purchase price of $260,000 while the median purchase price in the west region declined nearly 1% to $287,500.
Clark said those small median price declines or more moderate increases in home purchase prices point to better times ahead. He said he doesn’t think buyers need to worry about steep price declines anytime soon.
“When the market becomes more balanced, it’s not that we’ll see a decline in the price of a home, we’ll just see a reduction in the appreciation rate,” Clark said. “Instead of 7 or 8% increases, prices will go up by 2 or 3%.”
Median sale price in Wisconsin remains $375,000
The median for sale price for existing homes on the market continues to increase in larger areas of the state, too.
Realtor.com housing inventory metrics indicate the median list price in Wisconsin remained $375,000, unchanged from June to July. The median list price in the Madison area rose from $476,000 to $479,900 while Green Bay’s increased from $398,700 to $410,000. The median list price declined in the Milwaukee-Waukesha-West Allis region from $379,900 to $374,900 and in the Appleton area from $406,000 to $399,900.
Wisconsin homebuilders report second-quarter decrease in new home starts
New home construction adds more housing units, helping address inventory woes, but the cost of labor and materials to build new means not many new homes being built fall into lower, more affordable price ranges.
The Wisconsin Builders Association reported in the second quarter of 2023 home builders received permits for 3,103 new, single-family homes, a 6.8% drop from the second quarter of 2022. The second quarter decline is in line with a 6.9% decline in the first half of 2023.
The data wasn’t all bad, though. The Green Bay area saw new home permits increase 30% to 157 in the second quarter. Brown County, home to Green Bay, has seen new home construction permits increase 4% to 266 in the first half of 2023. La Crosse County issued 69 home construction permits, up almost 44%, while Marathon County, home to Wausau, issued 93 permits, a 25.7% increase.
Mike Howe, president of the builders’ association said the number of permits may be down but the industry is operating at capacity.
“Despite the slight decrease from quarter one to quarter two, the industry is operating at or near capacity,” Howe said in a media release. “Members across the state are still busy with high demand, likely caused by low existing home inventory.”
Contact Jeff Bollier at (920) 431-8387 orjbollier@gannett.com. Follow him on Twitter at @JeffBollier.
