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.