April 2023 Home Sales Report Tight Supply Continues to Hamper Sales and Increase Prices Date: May 25, 2023
April 2023 at a glance
As we move closer to the prime homebuying season, low inventories continue to affect the housing market. April 2023 home sales were 32.5% lower than April 2022, and the median home price rose 6.8% to $283,000 over that same 12-month period.
An examination of the year-to-date data reveals a similar picture. Home sales fell 28.4% in the first four months of 2023 compared to that same four-month period last year; the median price rose to $267,500, which is an increase of 7% relative to the January-through-April period of 2022.
Weak inventories continue to be the primary constraint on home sales. Over the past 12 months, new listings are down 32.6% and total listings are down 20.7%.
There continues to be a very strong seller’s advantage in the market. There were just 2.5 months of available supply in April, unchanged from a year earlier. This is well below the benchmark of six months of supply that indicates a balanced market.
Given the average pace of sales over the last 12 months, we would need 20,978 additional homes available for sale to get to a balanced market. This represents an increase of 138% from the April total statewide inventory of 15,167 homes.
The Wisconsin labor market remains very tight, with the statewide unemployment rate at 2.5% in March and the labor force participation rate at just 64.6%. This has contributed to a labor shortage, which is pushing incomes up. New estimates of Wisconsin’s median family income show an increase of 5.8% between April 2022 and April 2023.
Even with higher incomes over the past year, the combination of higher home prices and higher mortgage rates caused housing affordability to fall 13.7%. The Wisconsin Housing Affordability Index measures the percent of the median-priced home that a buyer with median family income qualifies to buy, assuming a 20% down payment and the remaining balance financed with a 30-year fixed-rate mortgage at current rates. The index fell from 161 in April 2022 to 139 in April 2023.
Analysis from the experts
Higher mortgage rates keep inventories low
“One reason housing inventory is so low is that current homeowners thinking about buying another home are likely sitting on very favorable mortgage rates, especially if they refinanced over the last couple of years. Rates have more than doubled since hitting bottom at the end of 2020, and homeowners may be reluctant to give up those record-low rates to buy another home.”
Joe Horning, 2023 Chairman of the Board of Directors, Wisconsin REALTORS® Association
Fed likely to pause on additional rate hikes this year
“The Fed raised the target federal funds rate by a quarter percent in May, which represents 10 straight meetings where it hiked rates. Interest rate increases are a blunt instrument used to slow the economy, and monetary policy is known to impact the economy with sometimes long and variable lags. Fortunately, inflation fell to 4.9% in April, well below the 9.1% peak last June. Conventional wisdom is that the Fed will pause any additional rate hikes in 2023 to avoid precipitating a significant recession.”
Dave Clark, Marquette University Economist and WRA Consultant
Price pressure has eased
“Home prices are still going up but at a slower pace than last year. In fact, the median price of Wisconsin homes sold in 2022 was 10.4% higher than 2021 median prices. In contrast, the housing price appreciation rate for the first four months of 2023 was only 7% higher than the first four months of 2022, suggesting demand pressure is easing.”
Michael Theo, President & CEO, Wisconsin REALTORS® Association