Wisconsin home prices continue to rise as inventory drops
MADISON, Wis. (WSAW) - The Wisconsin REALTORS® Association released its February 2023 Wisconsin Real Estate Report on Thursday, showing that low inventories have hampered home sales in Wisconsin while prices in the state continue to rise.
Home 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.
WRA Chairman of the Board of Directors Joe Horning said, “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.”
Highlights from the report show that every region of the state showed the same general pattern of slumping sales and median home price appreciation. 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.
Dave Clark, Marquette University economist and WRA consultant, said, “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.”
Additionally, 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.
“Although it is true that our winter home sales are at their lowest level in 11 years, the reasons for the weak sales now versus then are very different,” said WRA President and CEO Michael Thomas. “Our current market weakness is due to very low supply even as demand remains solid.”
The combination of flat income levels, rapidly rising mortgage rates, and strong price pressure pushed housing affordability down by 30.1%.
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