June 2020 Home Sales Report
Lower Impact of Pandemic on June Home Sales as Economy Improves
Date: July 20, 2020
MADISON, Wis. – Wisconsin’s housing market performed far better than
expected in June, with existing home sales down just 4.5% compared to that same
month in 2019, and median prices rose 3.6% to $222,000 over the same 12-month period,
according to the most recent analysis of the state housing market by the
Wisconsin REALTORS® Association (WRA). On a year-to-date basis, home
sales for the first half of 2020 were 4.9% lower than the first six months of
2019, and median prices were up 7.6% to $209,900.
“This is better than we expected
given the COVID-induced slide in sales we saw last month,” said WRA Chairman
Steve Beers. Sales slid sharply in May, dropping 24.3% compared to May 2019,
so being down just 4.5% is a big improvement. Beers qualified the comparison by
noting that sales in June last year were actually somewhat weak, dropping 7.7% from
June 2018. “It’s important to remember that we’re comparing closed sales with
the same month a year earlier, so the weak performance in June 2019 makes this
past month’s drop in sales smaller,” he said. Beers pointed out the strong
pre-coronavirus start to the year helped moderate the total decline in sales in
the first half of the year in all regions of the state. Comparing the first six
months of 2020 with the first half of 2019, sales fell at 0.7% in the Central
region, declined 1.5% in the West region, and dropped 2% in the North region. The
more densely populated urban Northeast, South Central and Southeast regions saw
their sales in the first half of 2020 fall between 3.9% and 7.2% relative to
the first half of 2019. “The bigger cities have been hit harder by the pandemic,
which may help explain these differences,” said Beers.
“It’s good to see June sales come
in above our expectations,” said WRA President & CEO Michael Theo. “Improvements
to the economy and a consistent decline of mortgage rates into record-low
territory has definitely softened the blow from the pandemic,” he added. The state
unemployment rate dropped significantly, falling from 12.1% in May to 8.5% in
June. In addition, the 30-year fixed-rate mortgage dropped for the sixth straight
month. The rate was at 3.62% in January and fell to 3.16% in June, which is yet
another record low.
“Low mortgage rates have also kept
Wisconsin housing affordable,” said Theo. The Wisconsin Housing Affordability
index measures the fraction of the median-priced home that a buyer with median
family income qualifies to purchase, assuming a 20 percent down payment and the
remaining balance financed with a 30-year fixed-rate mortgage at current rates.
Over the past 12 months, median family income dropped 4.2% and median
home prices rose 3.6%, but the record-low mortgage
rates have kept affordability relatively stable. The affordability index fell
just 1.5% over the last 12 months.
“After massive job losses as a
result of the economic lockdown in April and May, we saw a nice bounce in
June,” said David Clark, Marquette University economist and consultant to the
WRA. Wisconsin’s seasonally adjusted nonfarm employment rose by 104,600 total
jobs between May and June, nearly all of which are in the service sector. However,
this still leaves Wisconsin’s total nonfarm employment down by 294,300 jobs
over the past 12 months. The economic lockdown required to contain the pandemic
generated a 5% reduction in real GDP in the first quarter, and although the
second quarter figures have not yet been released, projections suggest a much
bigger contraction in the second quarter. “The big question is whether we see
recovery in the third quarter, and on that front, economists appear to be more optimistic,”
said Clark. The Survey of Professional Forecasters conducted by the
Philadelphia Federal Reserve Bank suggests the economy will begin to expand in the
third quarter and will continue to grow for the next four quarters. “There is
still a lot of uncertainty, but at least there are some promising signals
looking at the second half of 2020 and beyond,” said Clark. He noted that the
state economy should continue to improve if the recession is short-lived.
“REALTORS® were among
the first to effectively adapt to the challenges of COVID-19, and they continue
to safely serve both buyers and sellers in this market,” said Theo. With a
softer economy, there are good opportunities for buyers, especially given these
record-low mortgage rates. “However, this is still a seller’s market, so buyers
need to be pre-approved for financing so that they can move quickly when their
REALTOR® finds the right home,” he said.