February 2018 Home Sales Report
Even with Tight Inventories, Winter Home Sales Hit New Record
Date: March 18, 2018
MADISON, Wis. — Extremely strong demand
propelled usually slow winter Wisconsin home sales to record
levels, according to the most recent examination of the existing
home market by the Wisconsin REALTORS® Association
(WRA). The three-month period between December 2017 and February
2018 saw 13,471 homes sold, which is the highest winter season seen
since the WRA recalibrated its data systems beginning in 2005.
Winter home sales exceed the previous winter by 1.8 percent, and
they are 15.8 percent higher than winter sales five years ago.
February housing statistics were also in record territory, with
sales and prices hitting new peaks. February home sales rose 5.8
percent relative to February 2017, and median prices rose 7.4
percent to $166,000 over that same period.
"Winter is typically the slowest season for home sales in
Wisconsin for obvious reasons, and given our extremely low
inventory of single-family homes, it wouldn't be surprising that
this winter would see fewer sales," said Peter Sveum, WRA board
chairman. "But instead, with such robust demand, we're actually
seeing a record winter by historical standards," Sveum said.
Home sales can be volatile in February, especially at the
regional level. Wisconsin's Northeast region saw sales fall 3.4
percent compared to February 2017, but most other regions grew in
the range of 1.4 percent to 7.1 percent. The outliers include the
West region, where sales were up 10.8 percent, and the Central
region, which saw its home sales grow 40 percent over that period.
Note: The Central region had an unusually weak February 2017, which
is exaggerating the 2018 statistics. However, the most recent sales
totals still represent a record February for the region.
"Inventories do tend to improve as we get closer to the spring,"
according to Sveum, "but we are still well below where we were this
time last year." On a seasonal basis, inventories hit their lowest
point in January, and they tend to improve in the spring and peak
in the summer before tailing off again in the fall, according to
the WRA report. Thus, it is not surprising that we saw a slight
improvement to 3.7 months of supply in February compared to 3.5
months in January. However, once the regular seasonal patterns are
removed from the inventory data, the seasonally adjusted state
inventory levels are at the lowest point since the WRA began
tracking months of inventory at the end of 2009. "A seller's market
is defined as less than six months of supply, so we technically
crossed into a seller's market in September 2016, and inventories
have been falling ever since," said Sveum.
Other economic factors are boosting housing demand. "The economy
is healthy with the statewide unemployment rate sitting at 3.1
percent in January," said WRA President & CEO Michael Theo. The
state re-benchmarked its labor market data in January, and the
revision showed that Wisconsin added 23,300 private sector jobs
over the period between January 2017 to January 2018, with 9,100 of
those jobs in the manufacturing sector. Theo noted that strong
demand and tight supply are why prices have gone up so quickly the
last couple of years. Median prices rose 7.4 percent over past 12
months and are up 14.4 percent over the past 24 months.
Nationally, the Federal Reserve increased short-term interest
rates to counter the inflationary pressures brought about by the
tight labor markets. As a result, the 30-year fixed mortgage
increased by nearly a half percent between the first week of
January and the first week of March, when it reached 4.46 percent.
The 15-year fixed mortgage rose by more than half a percent to 3.94
percent over that same period. This interest rate hike has reduced
housing affordability. The Wisconsin Housing Affordability Index
shows the portion of the median-priced home that a household with
median family income can afford to buy assuming a healthy 20
percent down payment, and the remainder financed with a 30-year
fixed mortgage. The index was at 213 in February, down from 227 in
February 2016. "With the Fed tightening monetary policy to keep
inflation in check, mortgage rates will continue to rise over the
course of 2018, but it's important to remember that rates are still
quite low by historical standards," said Theo. "Still, buyers would
be well advised to move quickly before rising rates further hinder
their housing options," he said.