February 2023 Home Sales Report
Low Inventories Hamper Home Sales and Boost Prices
Date: March 23, 2023
February 2023 at a glance
- Wisconsin
existing home sales continued their slide, with sales falling by a significant
margin for five straight months. Homes sales fell 28.1% in February 2023 compared
to February 2022, and the median price rose 11.7% to $262,500 over that same
period.
- Every
region of the state showed the same general pattern of slumping sales and median
home price appreciation. Regional home sales dropped between 22% and 34.8% in
five of the six regions of the state. The largest decline was in the North
region where sales slid 40.3% between February 2022 and February 2023. Prices
typically increased between 6.6% and 10.1% over that same 12-month period. The
exception was the Northeast, which saw its February median price increase 20%
year over year.
- On a
year-to-date basis, home sales dropped 30.5% relative to the first two months
of 2022, and the median price rose to $256,500 over that same period, which
represents a 10.1% increase in prices
- Not
surprisingly, the winter is a slow period for sales in Wisconsin, and the
December-through-February period only accounts for 16.7% of sales in a typical
year. However, this winter was especially weak, with sales falling 31.9%
compared to the winter period 12 months earlier. The last time we saw such weak
sales was 2012 as the housing market was just starting to recover from the Great
Recession.
- The
30-year fixed mortgage rate has increased from an average of 3.76% in February
2022 to 6.3% in February 2023, and this has forced some buyers out of the
market. However, the buyers who do remain are highly motivated, which has kept
price pressure high.
- The
combination of flat income levels, rapidly rising mortgage rates and strong
price pressure pushed housing affordability down by 30.1%. Specifically, the
Wisconsin Housing Affordability Index shows that portion of the median-priced
home a borrower with median family income can purchase, assuming 20% down
payment and a 30-year fixed-rate mortgage used to finance the balance. The
index fell from 203 in February 2022 to 142 in February 2023.
Analysis from the experts
Lower Affordability Hasn’t
Significantly Dampened Buyer Interest
"Home affordability in the state has certainly
fallen as prices and mortgage rates have both increased. However, buyer
interest remains high, especially among first-time buyers in the millennial and
gen-Z generations. We’re still seeing multiple offers at or above asking price,
and as a result, homes are moving quickly."
Joe Horning, 2023 Chairman of the Board of Directors, Wisconsin REALTORS® Association
Fighting Inflation Now More
Difficult
"The Fed’s job to lower inflation just got
tougher as several large banks began facing insolvency. Over the last several
years, private banks increasingly used government bonds as an alternative to
private lending when economic growth slowed. Unfortunately, bonds on their
balance sheet lose value when the Fed increases short-term interest rates, and
this so-called “interest rate risk” can lead to bank failure if the bank’s
portfolio isn’t adequately diversified. With stubbornly high inflation, the Fed
must now worry about creating a serious recession if it pushes interest rates
up too high. The Fed needs to strike the right balance of lowering inflation
without creating a deep recession."
Dave Clark, Marquette University Economist and WRA Consultant
Inventory Problems Limit
Home Sales
"Although it is true that our winter home sales
are at their lowest level in 11 years, the reasons for the weak sales now vs.
then are very different. In the winter of 2011-12, we had plenty of inventory but
very weak demand. Our current market weakness is due to very low supply even as
demand remains solid."
Michael Theo, President & CEO, Wisconsin REALTORS® Association