February Wisconsin Housing Market Remarkably Robust February Wisconsin Housing Market Remarkably Robust Date: March 22, 2021
MADISON,
Wis. – Strong
February housing sales pushed what are typically the three slowest months of
the year into record territory, according to the most recent analysis of the existing
home market by the Wisconsin REALTORS® Association (WRA). February
2021 sales increased 5.5% compared to February 2020, which was the last month
before the recession began. Inventories continued to be very tight, which has
led to a sustained period of very strong price appreciation. The median price
rose to $215,000 in February, which is 13.2% higher than 12 months earlier. In
fact, median prices have grown at an annual rate of 9.7% or higher each month
since July of last year.
“This is
the second year in a row of record winter sales in the state,” said WRA Board Chair
Mary Duff. Closed sales for the period between December 2020 and February 2021 rose
to 16,350 homes sold statewide, which is 15% higher than the previous winter
sales record established last year. Every region of the state experienced
record sales this winter, with the strongest growth in the North region, which
increased 31.8% over the previous winter months. Duff noted that this shows
that buyers remain highly motivated. “Winter is definitely the least convenient
time to move in Wisconsin, but there are buying opportunities even in this
market, and REALTORS® have redoubled their efforts to serve those
motivated buyers,” she said.
“This is
the strongest seller’s market on record, and it pushed prices up sharply in
February,” said WRA President
& CEO Michael Theo. The inventory problem shows
no sign of abating. The state had just 2.1 months of available supply in
February, which is the second straight month of record-low inventory levels. “Every
price range of homes, every region of the state, and every type of county, from
the most urban to the most rural, have very strong seller’s markets,” said Theo.
He pointed out that this is generating strong upward pressure on prices, with
the median price up 11.1% comparing the first two months of 2021 with that same
period last year. “Rapid growth in housing prices typically hurts our
affordability, but fortunately mortgage rates remain close to the record-low
levels set in December, so affordability didn’t fall very much,” he said. The
Wisconsin Housing Affordability Index shows the fraction of the median-priced
home that a qualified buyer with median family income can afford to buy,
assuming 20% down and the remaining balance financed with a 30-year fixed
mortgage. Since the 30-year fixed mortgage rate has been below 3% since August,
and it stood at just 2.81% in February, Wisconsin affordability fell just 4.5% over
the last 12 months.
“One
bright spot has been the new construction market,” said Theo. A review of Wisconsin
single-family permit data compiled by the U.S. Census Bureau shows an increase
of 13.7% in 2020 compared to 2019, and housing permits were up 19% in January
compared to 12 months earlier. The number of permits is a reliable predictor of
housing starts. “Most buyers who build a new home are trading up from an
existing home, so the strong seller’s market is helping to fuel the new home
market,” said Theo. Since the average time from a housing start to completion
is 7.4 months in the Midwest, the increased permit activity in 2020 should help
mitigate the supply problem in 2021. “We still need to see more inventory of
existing homes, but this is a good sign going into the peak sales season,” he
said.
“The Wisconsin labor market continues to improve, and a recent re-benchmarking
of the data shows that the state has added back about two thirds of the jobs
lost in the first two months of the recession,” said David Clark, Marquette
University economist and consultant to the WRA. The state periodically recalibrates
monthly employment statistics derived on a monthly basis from small samples of
households and employers, with more complete counts of employment by the U.S.
Census. The updates reveal that the state lost 371,100 nonfarm jobs in the
first two months of the recession in March and April 2020, and it has added back
246,000 of those jobs as of January 2021. In addition, the unemployment rate
dropped to 3.8% in January, although part of that is a result of some workers
leaving the labor market. “As the vaccination rate expands, economic
restrictions should diminish, allowing for a more complete economic recovery,”
said Clark. He noted that preliminary indicators suggest the national economy
is growing at a healthy pace. The New York Federal Reserve Bank is projecting that
first quarter 2021 real (inflation adjusted) GDP growth will be 8.6%, which is very
strong economic growth. “A growing economy will continue to stimulate demand
for single-family housing this year,” said Clark.
The
combination of a growing economy and near record-low mortgage rates will keep
demand pressures high. “There’s no doubt that homes will move quickly once they
are listed, and a REALTOR® who is experienced can help buyers and
sellers navigate this very tight market, maximizing the likelihood of a
successful outcome,” said Theo.