March 2022 Home Sales Report

Rising Prices and Higher Mortgage Rates Reduce Affordability

Date: April 18, 2022

March 2022 at a glance

  • Low inventories drove up prices and limited sales in March compared to that same month last year. Existing home sales fell 7% over the past 12 months, and the median price rose 10.2% to $253,500 over that same period.
  • Sales in the first quarter of 2022 were down 4.4% relative to the first quarter of 2021, and the median price rose 9.6% to $240,000 comparing the first three months of 2022 to that same period in 2021.
  • Wisconsin inventories remain very tight, with just 2.1 months of available supply in March, which is lower than the 2.5 months of supply from 12 months earlier. Inventories tightened in every region of the state and across all county types, including larger metropolitan counties, mid-sized micropolitan counties and smaller rural counties. Since a six-month supply indicates a balanced market, the Wisconsin existing home market remains a strong seller’s market.  
  • The average monthly 30-year fixed mortgage rate was 4.17% in March, which is more than a full percent higher than the rate in March 2021, which was 3.08%.
  • Inflationary pressures continue to grow, fueled by supply chain problems, tight labor markets, rising energy prices and the ongoing impact of high levels of stimulus spending. The annual inflation rate increased to 8.5% in March, which is the sixth straight month in which the annual inflation rate has exceeded 6%.
  • Rapidly rising prices and a significant uptick in mortgage rates has led to a 19.5% reduction in housing affordability in the state. The Wisconsin Housing Affordability Index shows 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. The index stood at 161 in March. This indicates that a typical Wisconsin buyer can still afford to buy 161% of the median-priced home, but that is down from 200% in March 2021.
  • Homes continue to move quickly, with the average days on the market falling from 89 days in March 2021 to 79 days in March 2022.

Analysis from the experts

Inventories and sales performance

"Although REALTORS® have been able to overcome tightening inventories by moving homes more quickly during the slower winter months, that will be increasingly difficult as we transition into the prime buying season. We expect home sales to lag behind the record pace of 2021."

Brad Lois, 2022 Chairman of the Board of Directors, Wisconsin REALTORS® Association

Inflation problem fuels increase in mortgage rates

"The Federal Reserve has a dual mandate to maintain full employment and also maintain price stability, defined as a 2% annual inflation rate target. Given the acceleration of the inflation rate over the past year, the Fed is focusing its attention on controlling inflation by aggressively raising the short-term federal funds rate. While its actions are spiking mortgage rates in the short term, controlling inflationary expectations is key to returning 30-year fixed mortgage rates to the more favorable 3% to 4% range we’ve seen over the past decade."

Dave Clark, Marquette University Economist and WRA Consultant

Lower affordability should soften demand pressure

"Weak supply and strong demand have pushed prices up by around 10% on an annual basis, and with mortgage rates now going up more quickly, housing affordability is starting to suffer. Mortgage rates in early April are moving closer to 5%, and this trend will likely moderate housing demand pressure over the next few months as some potential buyers drop out of the market."

Michael Theo, President & CEO, Wisconsin REALTORS® Association


 

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