August 2022 Home Sales Report Low Inventories Diminish Sales and Increase Prices as Summer Housing Market Winds Down Date: September 20, 2022
August 2022 at a glance
Existing home sales continued their year-over-year decline as inventories tightened and mortgage rates rose in August. Existing home sales fell 10.4% over the past 12 months, and the median price rose to $271,000 in August 2022, which is an increase of 8.4% compared to August 2021.
The prime season for sales of existing homes is between May and August, which accounts for approximately 43% of annual home sales in a typical year. This year, home sales were down during this peak period. Specifically, 32,293 homes were sold in the May-to-August 2022 period, as compared to 36,096 closed homes during that four-month period in 2021.
Through the first eight months of the year, existing home sales fell 8.7% compared to that same period in 2021, and the median price rose 10.4% to $265,000.
Inventories remained very tight, with months of inventory falling from 3.3 months of supply in August 2021 to just 2.8 months in August 2022. One reason that inventories tightened in August was due to the outpace of homes sold at 8,289 versus the new listings at 8,084
Every region of the state is considered a strong seller’s market, with months of supply well below the six-month benchmark that characterizes a balanced market.
Mortgage rates eased slightly for the second straight month, falling to 5.22% in August, down from 5.52% in June this year but well above the 2.84% level from August 2021.
Overall, the combination of higher home prices and higher mortgage rates led to significantly lower housing affordability in the state. The Wisconsin Housing Affordability Index shows the portion of the median-priced home that a buyer with median family income qualifies to buy, assuming a 20% down payment and 30-year fixed-rate mortgage at current rates financing the remaining balance. The index dropped 28.6% from 189 in August 2021 to 135 in August 2022.
Analysis from the experts
Low Inventory and Declining Affordability Problems Are Softening the Market
"While there are still motivated buyers in the market and homes continue to move at a brisk pace, the limited supply and declining affordability have constrained home sales this summer. Unfortunately, we expect these tight supply conditions to continue through the remainder of the year."
Brad Lois, 2022 Chairman of the Board of Directors, Wisconsin REALTORS® Association
Fed Fully Committed to Lowering Inflation
"Inflation peaked at 9.1% in June and has moderated only slightly, remaining above 8% in both July and August. The Fed has emphasized its resolve to get inflation rates back to its 2% target, and that translates into aggressively raising short-term interest rates. As a result, we should expect additional upward pressure on mortgage rates over the next 6 to 12 months. Indeed, the 30-year mortgage rate went over 6% in mid-September for the first time since 2008, and we expect the upward trajectory to continue until inflation eases significantly."
Dave Clark, Marquette University Economist and WRA Consultant
Housing Price Appreciation Will Continue at Slower Pace
"Lower affordability is driving some potential buyers out of the market, and that will likely slow the pace of price appreciation. However, until we move toward a more balanced market, home prices will continue to increase at or near the double-digit pace we’ve seen year to date."
Michael Theo, President & CEO, Wisconsin REALTORS® Association