September 2020 Home Sales Report

Record-low Mortgage Rates Help Fuel September Housing Market

Date: October 19, 2020

MADISON, Wis. – As mortgage rates fell to their lowest level on record, the Wisconsin existing home market responded with record September sales and robust price appreciation. The 30-year fixed-rate mortgage dropped to 2.89% in September, which pushed home sales up 18.1% compared to September 2019, and increased the statewide median price 17.9% to $229,900. 

“When we consider what transpired last spring, we never would have imagined how quickly the housing market would rebound,” said WRA Chairman Steve Beers. The economic lockdown of the state pushed annualized sales down 23.6% in May alone. In contrast, the annual growth in home sales surged by 10.2% in July, rose 2.6% in August and increased 18.1% in September. In fact, this is the strongest third quarter on record for Wisconsin home sales, eclipsing the previous third quarter sales record established last year by 9.8%. “What makes this even more impressive is that we hit this new record even though inventories continued to slip,” said Beers. Wisconsin had just 3.7 months of housing supply in September compared to 5.1 months of supply 12 months earlier.

“Demand has increased in recent months for a couple of reasons: low mortgage rates and an improving job market in the state,” said WRA President & CEO Michael Theo. Mortgage rates began dropping in January, and the aggressive actions by the Federal Reserve Bank to mitigate the effects of the economic shutdown have pushed mortgage rates to record-low levels for six straight months. These actions, combined with the stimulus programs, have also dropped the state unemployment rate from its peak of 13.6% in April 2020 to 5.4% in September. “Although we’re still well below the levels of last year, we made up ground this past month,” said Theo. Non-farm employment rose by 23,800 jobs between August and September, with the private sector component increasing by 13,700 jobs. 

“REALTORS® are definitely moving homes, but they’re hampered by limited supply, and that is really pumping up prices,” said Theo. Not surprisingly, this has made Wisconsin housing less affordable. The Wisconsin Housing Affordability Index shows the fraction of the median-priced home that a qualified buyer with median family income can afford to purchase, assuming 20% down and the remaining balance financed with a 30-year fixed-rate mortgage. The index fell from 216 in September 2019 to 195 in September 2020. “That’s a big drop, but we need to keep that in perspective,” said Theo. Thanks to mortgage rates that are nearly three quarters of a percent lower than this time last year, the typical buyer can still afford to buy a house that is almost double the median family income.  

“While the Wisconsin housing market recovery appears to be V-shaped, the national economy is following a more traditional path,” said David Clark, Marquette University economist and consultant to the WRA. The national unemployment rate has fallen from a peak of 14.7% in April to 7.9% in September. “After the major contraction in the second quarter this year, we definitely expect improvement in the second half of the year, but it will take some time to fully recover,” said Clark. In the second quarter, real GDP slid 31.4% relative to the previous quarter. In contrast, estimates by the New York Federal Reserve Bank are projecting third quarter real GDP growth to come in at just over 14%. Clark also noted that there are indications that consumers are gaining confidence. The Consumer Confidence Index published by the Conference Board showed a sharp increase in September, in terms of consumers’ assessment of both current and short-term future conditions. “This likely bodes well for the housing market over the next few months,” he said.

Theo indicates that buyers shouldn’t conclude that the housing market shuts down after the summer. “REALTORS® still sell a lot of homes during the fall season, so there are plenty of great options for buyers,” he said. It’s still a strong seller’s market, so buyers need to be ready to move quickly when their REALTOR® identifies the right home. “Having your financing pre-approved is really the key to success in this very tight market,” said Theo.

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