A Strong December Pulls 2019 Sales Even with 2018 as Prices Continue to Rise December 2019 Home Sales Report Date: January 20, 2020
MADISON, Wis. – Wisconsin
closed 2019 on a high note in December with both home sales and median prices
up by double digits on an annualized basis, according to the most recent analysis
of the existing home market by the Wisconsin REALTORS® Association
(WRA). Home sales increased 14.8 percent between December 2018 and December
2019, and median prices rose 10.1 percent to $197,000. This strong performance
for December pulled annual sales nearly even with last year, with 2019 home
sales just 0.1 percent below those of 2018. Given continued weakness in
inventories, median prices rose 10.1 percent on a year-to-date basis to $197,500
for all of 2019.
“It’s
important to remember that we’re comparing to a pretty weak sales performance
in December 2018,” said WRA Chairman Steve Beers. In fact, sales in
December 2018 were 12 percent lower than the same month in 2017. In contrast, comparing
December 2019 with December 2017, sales in the state are up about 1 percent, which
is just 2.2 percent below the strongest December on record, which occurred in
2016. “It’s good to finish the year strong, which put us over 82,000 sales for the
fourth straight year,” said Beers. He also noted that sales were quite
consistent across the various regions of the state. On a year-to-date basis, the
North and Southeast regions grew between 1.1 percent and 1.3 percent, whereas
the other four regions saw their sales fall slightly — between 0.3 percent and
2.7 percent.
“This
economy continues to chug along, which is why sales remained steady, but tight
supply continues to fuel the growth in home prices,” said WRA President & CEO Michael Theo. With
unemployment rates currently in the 3.3 percent range, the state is at full
employment, and this keeps demand pressure strong. Comparing 2019 with the
previous year, the median price increased 7.3 percent to $197,500. This is the
highest annual median price on record since the WRA modified its data collection
methods in 2007. Wisconsin has been consistently classified as a seller’s
market since 2017. The state had just 3.2 months of supply in December, which
is well below the six-month mark that signals a balanced housing market. “The
upshot is that we have too many buyers chasing too few homes, and that will
continue to drive our prices up,” he said.
“Moving into a new
decade, the U.S. economy continues to grow, and it looks like the trade wars are
finally winding down,” said Theo. The recent signing of trade agreements with
our North American neighbors and with China should keep the U.S. economy out of
recession for 2020, which should keep housing demand on solid footing. However,
the supply side problems will likely persist in 2020 as the three primary sources
of supply show few signs of increasing supply. New construction of
single-family homes has remained flat throughout most of 2019, and foreclosure
activity continued to fall in 2019; note this is a good thing for the economy,
but it results in lower supply. While new listings of existing homes were only
down slightly in December, total listings actually fell nearly 12 percent over
the last year. In the absence of an economic slowdown that softens demand, these
supply trends will continue to drive prices up at well above the rate of
inflation.
The silver lining
has been the significant reduction in mortgage rates over the last year, which
has served to keep Wisconsin housing affordable. The 30-year fixed-rate
mortgage has remained below 4 percent since June of last year, and it stood at 3.72
percent in December. That compares to 4.64 percent in December 2018. “The reduction
in the mortgage rate has more than countered the increase in home prices, so
housing affordability has actually improved slightly,” said Theo. The Wisconsin
Housing Affordability Index shows the fraction of the median-priced home that a
buyer with median family income can afford to buy, assuming 20 percent down,
and the remaining balance financed with a 30-year fixed-rate mortgage. The
index rose from 205 in December 2019 to 210 this past December. “These are
great rates, and the winter is actually a good time to buy since lower demand
during those months could soften prices,” he said. Theo indicated that “working
with a REALTOR® who is experienced maximizes the likelihood of
success during these slower times of the year.”