February Wisconsin Housing Market Remarkably Robust

February Wisconsin Housing Market Remarkably Robust

Date: March 22, 2021

MADISON, Wis. – Strong February housing sales pushed what are typically the three slowest months of the year into record territory, according to the most recent analysis of the existing home market by the Wisconsin REALTORS® Association (WRA). February 2021 sales increased 5.5% compared to February 2020, which was the last month before the recession began. Inventories continued to be very tight, which has led to a sustained period of very strong price appreciation. The median price rose to $215,000 in February, which is 13.2% higher than 12 months earlier. In fact, median prices have grown at an annual rate of 9.7% or higher each month since July of last year.

“This is the second year in a row of record winter sales in the state,” said WRA Board Chair Mary Duff. Closed sales for the period between December 2020 and February 2021 rose to 16,350 homes sold statewide, which is 15% higher than the previous winter sales record established last year. Every region of the state experienced record sales this winter, with the strongest growth in the North region, which increased 31.8% over the previous winter months. Duff noted that this shows that buyers remain highly motivated. “Winter is definitely the least convenient time to move in Wisconsin, but there are buying opportunities even in this market, and REALTORS® have redoubled their efforts to serve those motivated buyers,” she said.  

“This is the strongest seller’s market on record, and it pushed prices up sharply in February,” said WRA President & CEO Michael Theo. The inventory problem shows no sign of abating. The state had just 2.1 months of available supply in February, which is the second straight month of record-low inventory levels. “Every price range of homes, every region of the state, and every type of county, from the most urban to the most rural, have very strong seller’s markets,” said Theo. He pointed out that this is generating strong upward pressure on prices, with the median price up 11.1% comparing the first two months of 2021 with that same period last year. “Rapid growth in housing prices typically hurts our affordability, but fortunately mortgage rates remain close to the record-low levels set in December, so affordability didn’t fall very much,” he said. The Wisconsin Housing Affordability Index shows the fraction of the median-priced home that a qualified buyer with median family income can afford to buy, assuming 20% down and the remaining balance financed with a 30-year fixed mortgage. Since the 30-year fixed mortgage rate has been below 3% since August, and it stood at just 2.81% in February, Wisconsin affordability fell just 4.5% over the last 12 months. 

“One bright spot has been the new construction market,” said Theo. A review of Wisconsin single-family permit data compiled by the U.S. Census Bureau shows an increase of 13.7% in 2020 compared to 2019, and housing permits were up 19% in January compared to 12 months earlier. The number of permits is a reliable predictor of housing starts. “Most buyers who build a new home are trading up from an existing home, so the strong seller’s market is helping to fuel the new home market,” said Theo. Since the average time from a housing start to completion is 7.4 months in the Midwest, the increased permit activity in 2020 should help mitigate the supply problem in 2021. “We still need to see more inventory of existing homes, but this is a good sign going into the peak sales season,” he said.

“The Wisconsin labor market continues to improve, and a recent re-benchmarking of the data shows that the state has added back about two thirds of the jobs lost in the first two months of the recession,” said David Clark, Marquette University economist and consultant to the WRA. The state periodically recalibrates monthly employment statistics derived on a monthly basis from small samples of households and employers, with more complete counts of employment by the U.S. Census. The updates reveal that the state lost 371,100 nonfarm jobs in the first two months of the recession in March and April 2020, and it has added back 246,000 of those jobs as of January 2021. In addition, the unemployment rate dropped to 3.8% in January, although part of that is a result of some workers leaving the labor market. “As the vaccination rate expands, economic restrictions should diminish, allowing for a more complete economic recovery,” said Clark. He noted that preliminary indicators suggest the national economy is growing at a healthy pace. The New York Federal Reserve Bank is projecting that first quarter 2021 real (inflation adjusted) GDP growth will be 8.6%, which is very strong economic growth. “A growing economy will continue to stimulate demand for single-family housing this year,” said Clark.

The combination of a growing economy and near record-low mortgage rates will keep demand pressures high. “There’s no doubt that homes will move quickly once they are listed, and a REALTOR® who is experienced can help buyers and sellers navigate this very tight market, maximizing the likelihood of a successful outcome,” said Theo.

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