Wausau Pilot & Review
Low home sales and soaring prices continue to pose significant hurdles for both buyers and sellers, according to a Wisconsin Realtors Association June 2023 report released this week.
The current housing market situation is a cause for concern for stakeholders and policymakers alike, as the state grapples with the challenges of balancing supply, demand, and affordability.
Overall, the impact of higher mortgage rates and surging home prices led to a decline in housing affordability.
The Wisconsin Housing Affordability Index dropped from 145 in June 2022 to 125 in June 2023, illustrating the shrinking portion of median-priced homes that typical buyers with median family incomes can afford with a 20% down payment and a 30-year fixed-rate mortgage at current rates.
According to the report, June 2023 home sales plummeted by 19.7% compared to the same period in 2022, indicating a noticeable decline in buyer demand. Concurrently, the median home price spiked by 8.6% over the last 12 months, reaching a record $304,000 statewide. This rise in prices marks the first time the monthly median price has surpassed the $300,000 mark, leaving first-time buyers particularly affected.
Joe Horning, the 2023 Chairman of the Board of Directors for the Wisconsin REALTORS® Association, highlighted the dire impact of tight inventory on first-time buyers. With just 3.1 months of available inventory, far below the six-month threshold for a balanced market, the state faces a pressing need to nearly double its housing supply to attain equilibrium.
Horning emphasized that the most severe scarcity is observed in the $350,000 or lower price range, dealing a severe blow to potential first-time homeowners.
Michael Theo, President & CEO of the Wisconsin REALTORS® Association, warned of the affordability crisis in the current market. The Wisconsin Housing Affordability Index reached its lowest level yet in June 2023, as soaring mortgage rates and escalating home prices combined to limit housing accessibility. With a substantial 8.6% increase in home prices compared to June 2022 and mortgage rates surging over the same period, prospective buyers find it increasingly difficult to purchase homes at a level they can comfortably afford. Theo expressed that without a moderation in price appreciation and mortgage rates, improvements in affordability are unlikely.
In June, inflationary pressures showed signs of abating, with headline inflation decreasing to 3% from the previous month’s 4% and core inflation falling to 4.8%. This decline was expected, given the comparison to inflated June 2022 prices that drove inflation to a staggering 9.1%. Analysts view this reduction in inflation as positive for the economy, potentially leading to lower mortgage rates in the upcoming months.
Key highlights from the report indicate that as the prime season for home sales approaches, tight inventories have contributed to a considerable decline in sales and substantial price hikes. Existing home sales in June dipped by 20.4% when compared to the same period in the previous year. Moreover, total listings fell by 21.4% in the past 12 months, and newly listed homes saw a significant drop of 24.2% between June 2022 and June 2023.
With the state’s available supply of housing at a meager 3.1 months in June 2023, the market continues to favor sellers over buyers, putting upward pressure on prices. Although the pace of home price appreciation had moderated from March through May, with annual rates between 5.9% and 6.9%, June witnessed a resurgence, with the annual appreciation rate soaring to 8.6%.
Mortgage rates played a vital role in influencing market dynamics. Over the past year, the average 30-year fixed mortgage rate surged from 5.52% in June 2022 to 6.70% in June 2023, as reported by Freddie Mac. This increase affected both demand and supply, as some buyers withdrew from the market temporarily, hoping for improved rates, while many potential sellers hesitated to list their homes amid the prevailing high rates.
