MADISON — After relatively flat sales through the first two months of 2017, existing home sales rebounded sharply in March, pushing first quarter sales and prices well above their levels last year, according to the most recent analysis of sales by the Wisconsin REALTORS Association (WRA).
March home sales were 7.2 percent higher than those of March 2016. Continued tight inventories pushed the median prices for March up 5.2 percent to $163,000 over the past 12 months. For the first quarter, existing home sales increased 3.2 percent compared to that quarter in 2016, and median prices were up 6.4 percent to $159,575 over that same period. This represents the strongest level of March sales and the strongest first quarter sales seen in the state since the WRA recalibrated its system of tracking home sales in 2005.
“What is amazing about these record sales is that they are occurring against a backdrop of very tight statewide inventories,” said WRA board chairman Erik Sjowall.
He noted that regions that had more inventory saw more growth in sales. Compared to the same period last year, March sales were up in all six regions, with the most robust sales growth seen in the North, up 28.1 percent, the Central, up 14.5 percent, and the Northeast, up 10.1 percent. These three regions had between 5.5 and 9.5 months of inventory available in March. In contrast, sales rose but at a more modest pace in the Southeast region, up 4.7 percent, the South Central region, up 3.4 percent, and the West region, up 2.2 percent. March inventory levels in these regions ranged between 3.8 months and 4.3 months. Whereas rural counties had eight months of inventory in March, there were just3.8 months of available supply in the metropolitan counties in the state.
“The meager inventories in our urban areas have been a significant drag on sales, and so it’s not surprising that the more heavily urbanized areas in the West, Southeast and South Central regions grew quite a bit slower than the more rural regions of the state,” said Sjowall.
Locally, the median price of a home in Pierce County is $220,000, well ahead of $158,000 an average home was listed at back in 2016 at this time. However sales were down over 13 percent from 37 a year ago to 32 now. In St. Croix County, median prices were over a year’s time from $195,000 to $225,000 and sales were also up to 131 sales from 95 a year ago.
“Tight supply combined with strong demand conditions is a recipe for higher prices, and that’s what we’re seeing moving into the spring and summer housing markets,” said WRA President and CEO Michael Theo.
The statewide labor market continues to improve, with the March seasonally adjusted unemployment rate now at 3.4 percent, down from 4.1 percent this time last year. The unemployment rate has gone down even though the state labor force has grown over the last 12 months, which means job growth is more than keeping pace with the number of new job seekers.
“Our strong statewide economy is definitely putting upward pressure on home prices, which have been growing at more than double the rate of inflation,” said Theo.
Median home prices rose at 6.4 percent between the first quarter of 2016 and that quarter in 2017 compared to the inflation rate, which has been rising at an annual pace of between 2.4 percent and 2.7 percent for the first three months of 2017.
Housing affordability has fallen over the last year, due primarily to rising mortgage rates and rising home prices. Specifically, the Wisconsin Home Affordability Index measures that percent of the median-priced home that a buyer with median family income can afford to buy, assuming the buyer has a 20 percent down payment and qualifies to finance the remainder with a 30-year fixed-rate mortgage.
“We’ve really got a tug of war going on with higher prices and higher mortgage rates pulling affordability down, even as rising incomes serve to improve affordability,” said Theo.
He noted that the income growth is the weaker of the two opposing forces and hence the index has fallen to 222 from 242 last year.
“The good news is the typical qualified buyer can purchase more than twice the value of the typical home in Wisconsin, but buyers have to be prepared to move quickly, especially in the red hot urban markets,” Theo said.