Wisconsin REALTORS® Association: March 2023 Home Sales Report

March 2023 Home Sales Report

Weak Inventories Keep March Home Sales Down and Drive Prices Up

Date: April 20, 2023

March 2023 at a glance

  • Low inventories kept March sales low and contributed to strong price pressure over the past 12 months. Existing home sales fell 23.6% between March 2022 and March 2023, whereas the median home price rose 6.9% to $272,500 over that 12-month period.
  • This is consistent with the pattern seen in January and February. Overall, first quarter sales fell 27.4% relative to the first three months of 2022, and median prices rose 9.4% to $262,500 over that same period.
  • Inventory does follow a regular seasonal pattern, with inventory levels typically shrinking in the winter and then growing during the spring and before peaking in the summer. However, the inventory levels for March are historically low, with just 13,342 units for sale
  • Months of supply were at just 2.2 months in March, unchanged from a year earlier. The last time the Wisconsin housing market was balanced, with six months of supply, was August 2017. Over the past three years, March inventory levels have been consistently in the range of 2.2 months to 2.5 months, translating to a very strong seller’s advantage in the market.
  • Tight inventories were remarkably consistent throughout the state. March inventories ranged from a low of 2.0 months in the Central and Southeast regions to just 2.5 months of supply in the North region. Over the last 12 months, inventories have been tightest for entry-level homes, which are homes with sale prices ranging between $125,000 and just under $350,000, where there were 1.5 to 1.7 months of supply. The strongest supply was seen in higher-priced homes, priced at $500,000 and over, where inventories stood at 4.2 months
  • Housing affordability is influenced by changes in income, home prices and borrowing costs. The Wisconsin Housing Affordability Index measures the fraction of the median-priced home that a qualified buyer with median family income can buy, assuming a 20% down payment and the remaining balance financed using a 30-year fixed-rate mortgage at current rates. Median prices rose 6.9% over the last 12 months, and the average monthly mortgage rate increased from 4.17% in March 2022 to 6.54% in March 2023. In contrast, the median family income is projected to have been flat over the past year. The net effect is that the Wisconsin Housing Affordability Index dropped from 181 in March 2022 to just 132 in March 2023.

Analysis from the experts

Millennial buyers at a disadvantage

“Millennials are typically first-time buyers. They have smaller downpayments compared to repeat buyers who can use the proceeds of their previous home sale to increase their down payment. This results in heavier reliance on mortgage financing by millennials, so the higher mortgage rates more quickly price them out of the market than other buyers.”

Joe Horning, 2023 Chairman of the Board of Directors, Wisconsin REALTORS® Association  

 

Inflation improving but the fed still has work to do

“We got some good news on the inflation front as headline inflation dropped a full percent from an annual pace of 6% in February to 5% in March. However, this is still well above the Fed’s target inflation rate of 2%, and at its most recent meeting, the Fed pushed the short-term federal funds rate up by a quarter percent. It also left the door open to another rate increase in May.” 

Dave Clark, Marquette University Economist and WRA Consultant

 

Consequences of low inventory

“At the current pace of sales, we would need the available inventory to increase by nearly 24,000 homes, which is an increase of 178% from current levels, to get back to a balanced existing home market. The current housing shortage is depriving young individuals of the wealth-generating benefits of homeownership.”

Michael Theo, President & CEO, Wisconsin REALTORS® Association

About the WRA

The Wisconsin REALTORS® Association is one of the largest trade associations in the state, representing over 17,500 real estate brokers, salespeople and affiliates statewide. All county figures on sales volume and median prices are compiled by the Wisconsin REALTORS® Association and are not seasonally adjusted. Median prices are only computed if the county recorded at least 10 home sales in the quarter. All data collected by the WRA is subject to revision if more complete data becomes available. Beginning in June 2018, all historical sales volume and median price data from 2015 forward at the county level have been re-benchmarked using the Relitix system that accesses MLS data directly and in real-time. Data prior to January 2015 is derived from the Techmark system that also accessed MLS data directly. The Wisconsin Housing Affordability Index is updated monthly with the most recent data on median housing prices, mortgage rates and estimated median family income data for Wisconsin. Data on state foreclosure activity is compiled by Dr. Russ Kashian at the University of Wisconsin-Whitewater. 

Note that the WRA employs a slightly different protocol to determine inventory levels than the protocol used by the REALTORS® Association of South Central Wisconsin (RASCW). For consistency, the summary tables for the South Central region reported in the WRA release employ the WRA approach. However, a modified table employing the RASCW methodology is available from the WRA upon request.

 

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