June 2023 Home Sales Report Inventories Remain Tight, Hampering Sales and Driving Prices Higher Date: July 20, 2023
June 2023 at a glance
As the prime season for home sales approaches, very tight inventories have kept sales low and put strong upward pressure on prices. Existing home sales in June dropped 20.4% compared to their levels in June 2022, and the median price rose to $304,000 in June 2023, which represents an 8.6% increase over the last 12 months. This is the first time the statewide monthly median price has exceeded $300,000
Comparing the first half of 2023 with that same period in 2022, existing home sales fell 24.8%, and the median price rose 7.7% to $280,000.
A six-month supply of housing is considered a balanced market. The state is well below that benchmark with just 3.1 months of available supply in June, up slightly from 3.0 months in June 2022. This signals an ongoing seller’s advantage in the housing market
The tightening supply is a real problem for buyers. Market pressure normally peaks in the summer, with June being the highest volume month of the year. When there are fewer homes for sale, this drives prices up at a more rapid pace. While home price appreciation had moderated over the March-through-May period, rising at an annual rate of between 5.9% and 6.9%, June saw a spike in which the annual appreciation rate rose to 8.6%.
Mortgage rates rose over the last 12 months, with the average 30-year fixed mortgage rate increasing from 5.52% in June 2022 to 6.70% in June 2023, according to Freddie Mac.
These higher rates affect both the demand and supply side of the market. Demand pressure eases as some buyers choose to temporarily drop out of the market until rates improve. But higher rates also keep some potential sellers from listing their homes since many homeowners have locked in very favorable rates over the past several years and are reluctant to buy another home at much higher rates.
Overall, higher mortgage rates and the spike in home prices have pushed down affordability in the state. The Wisconsin Housing Affordability Index shows the portion of the median-priced home that a typical buyer with a median family income qualifies to purchase, assuming they have a 20% downpayment and a 30-year-fixed-rate mortgage at current rates to finance the remaining balance. The index fell from 145 in June 2022 to 125 in June 2023.
Analysis from the experts
Tight inventory hurts first-time buyers
“The state is a long way from a balance in the housing market at just 3.1 months of available inventory. We would need to nearly double our available inventory to get to a balanced market. The tightest supply of homes is in the $350,000 or lower price range, which really hits the first-time buyers hard.”
Joe Horning, 2023 Chairman of the Board of Directors, Wisconsin REALTORS® Association
Inflationary pressures continue to subside
“The June inflation figures show headline inflation down a full percent to 3% from May figures, and the less volatile core inflation rate fell a half percent to 4.8%. Some analysts have noted that inflation was expected to be much lower in June because we are comparing to June 2022 prices that spiked inflation to 9.1%. Still, this is good news for the economy and hopefully it will lower inflationary expectations, which should lead to lower mortgage rates in the coming months.”
Dave Clark, Professor Emeritus of Economics and WRA Consultant
Higher mortgage rates and home prices a perfect storm for affordability
“We’ve been tracking the Wisconsin Housing Affordability Index since 2009, and the June 2023 level of the index is the lowest we’ve seen to date. It’s not difficult to understand why. Home prices are up 8.6% since June 2022, and the 30-year fixed mortgage rate is higher by more than a percent compared to last year. Until we see some moderation in price appreciation and mortgage rates, affordability is not likely to improve.”
Michael Theo, President & CEO, Wisconsin REALTORS® Association