December 2020 Home Sales Report

Red-hot Wisconsin Housing Market Set New Records in 2020

Date: January 18, 2021

MADISON, Wis. — The red-hot Wisconsin real estate market of 2020 was a tale of two halves. The pandemic-induced economic lockdown ushered in a national recession that hurt home sales over the first six months of 2020. But home sales surged in the second half to set new records for both sales and prices, according to the year-end analysis of existing home sales by the Wisconsin REALTORS® Association (WRA). December sales were especially strong. Fueled by record-low mortgage rates, existing home sales increased 22.5% in December compared to last December, and median prices rose 9.7% to $215,000 over that same period. For all of 2020, existing home sales rose 7.3% to 88,685 total homes sold, which is the highest annual sales amount recorded in the state since the WRA revised its data collection methodology in 2005. The previous record was set in 2017 when sales totaled 83,984. Median prices also set a highwater mark in 2020, rising 11.4% to $220,000. This is the first year in which the annual median price eclipsed $200,000.

“To suggest that this has been an up and down year would be a significant understatement, but it’s great to see us closing out 2020 with such strong growth,” said new WRA Board Chair Mary Duff, a REALTOR® with the Stark Company of Madison. After a solid first quarter, the economic lockdowns caused sales to slide 10.2% on an annualized basis in the second quarter. However, once the economy began to reopen, home sales grew at a very robust pace. Sales increased relative to that same quarter in 2019, by 11% in the third quarter and 22.7% in the fourth quarter of the year. “Relaxing the restrictions was part of the reason for the surge in sales, but a huge factor is the historically low mortgage rates in 2020,” said Duff. The 30-year fixed mortgage rate fell to 2.68% in December, which is a new record low. To put this in perspective, that rate is a full percent lower than 12 months earlier and almost two percentage points lower than two years ago. All regions of the state experienced an increase in sales during 2020. The strongest growth was seen in the North region, up 14.7%. There were four regions — Central, South Central, Southeast and West —  that saw home sales grow between 6.5% and 7.4%, and the Northeast region grew by 4.6% in 2020. 

“This sales growth has really put a strain on inventories,” said WRA President & CEO Michael Theo. Inventories have been falling throughout the year, and they dropped sharply the last three months of the year. In September, there were 3.9 months of housing supply, well below the benchmark of six months that characterizes a balanced market. By December, statewide inventory levels had dropped to just 2.2 months, which is the lowest level since the WRA began tracking this indicator of supply in 2009. REALTORS® are moving homes at record pace, but that cannot continue indefinitely. In December, Wisconsin recorded 7,117 home sales, but only added 3,994 new listings to the overall inventory of homes for sale. “Eventually overall inventory gets so low that it leads to flat or even falling home sales,” said Theo. 

The other consequence of strong demand and weak supply is higher prices. “When demand far outpaces supply, like it did this year, you get double-digit price increases, which is what we saw in 2020,” said Theo. Fortunately, record low mortgage rates have kept the state’s housing relatively affordable. The Wisconsin Housing Affordability Index shows the fraction of the median-priced home that a buyer with median family income qualifies to buy, assuming 20% down and the remaining balance financed with a 30-year conventional mortgage at current rates. The index was 209 in December, which was nearly unchanged from December 2019. “We’re still in good shape on the affordability front, but we can’t expect mortgage rates to continue to fall, especially once the economy has fully recovered,” he said.

“The prospect of a recovery is closely tied to the successful rollout of COVID-19 vaccines,” said David Clark, Marquette University economist and consultant to the WRA. Nationally, the labor market had shown consistent signs of improvement after the economic lockdowns were relaxed beginning in May 2020, but nonfarm payroll employment fell unexpectedly in December as the virus spiked in the last two months of 2020. “The good news is that vaccines are now being administered to the most vulnerable, and widespread COVID vaccinations are on the horizon, which should generate a significant boon to the economy,” said Clark. The Philadelphia Federal Reserve Bank surveys business and academic economists each quarter about their predictions of the overall economy. The latest survey indicates they believe the economy likely contracted 3.5% in 2020, but they are predicting 4% growth in real GDP in 2021. 

“It will be good to settle into a stable period of economic growth, and hopefully our inventory situation will improve,” said Theo. He noted that this is an ideal time to sell a home. “The housing shortage means that homes are moving quickly, and a REALTOR® who is experienced can work to get sellers top dollar for their home,” he said. 

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