March 2021 Home Sales Report

Tight Inventories Keep March Sales Flat and Drive Up Prices

Date: April 19, 2021

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March 2021 Housing Press Release

MADISON, Wis. – Home sales flattened and median prices surged in March as inventories continued to shrink compared to last year, according to the monthly analysis of the existing home market by the Wisconsin REALTORS® Association (WRA). Home sales did establish a new record level for March, rising slightly, up 0.8%, above the previous record sales level established in March 2020. However, total listings of homes for sale fell 36.9% over the last 12 months, pushing median prices up 10.3% to $229,900 over that same period. A review of the market in the first quarter of 2021 shows home sales up 5.9% compared to the first quarter of 2020, and median prices up 11.2% to $218,000 over that same period. Once again, this set a new record for home sales in the first quarter of the year.

“We keep setting new sales records, but the inventory crisis is going to start hurting our sales, and we’ll likely start seeing that this summer,” said WRA Board Chair Mary Duff. In March 2020, the economy had just entered a recession, and the economic lockdowns in March, April and part of May kept closed home sales down over the April-through-June period of 2020. “Sales really started taking off in July of last year, but we were in a better inventory situation then,” Duff said. “Unfortunately, the current trends in listings don’t look good,” she said. Last March, total inventory was down just 4.9% compared to March 2019, a modest decline. By March 2021, inventory levels had plunged 36.9% over just 12 months. “There isn’t a region in the state that had more than 2.6 months of available supply in March, which means all regions are classified as very strong seller’s markets,” said Duff. A market is balanced if it has six months of available supply, and Wisconsin has never seen such a tight market going into the peak summer sales season. “We’ll probably sell more homes in April and May of this year compared to those months last year during the lockdowns, but after that, it won’t be surprising to see sales fall off compared to last year,” she said. 

“The red-hot housing market is driving prices up quickly, which is good for sellers but tough on buyers,” said WRA President & CEO Michael Theo. “It’s not unusual for buyers to face fierce competition for homes they want with multiple competing offers that are well above asking price,” said Theo. He noted that this can create a dilemma for potential sellers. “It’s a double-edged sword because homes are selling quickly and for top dollar, which is an advantage for sellers; but if those sellers don’t already have a new place lined up, they risk becoming buyers in an overheated market,” he said. 

Theo also pointed out that mortgage rates are beginning to inch up, which is starting to hurt affordability. The Wisconsin Housing Affordability Index shows the fraction of the median-priced home that a buyer with median family income can afford to buy, assuming a 20% down payment and a 30-year fixed-rate mortgage at current rates financing the remainder of the purchase. The index fell from 212 in March 2020 to 201 in March 2021, a modest 5.3% reduction in affordability. “We’ve been lucky to have record-low mortgage rates partially offsetting the rapidly rising home prices, but mortgage rates have begun to increase, and that’s likely to continue,” said Theo. After bottoming out at 2.68% in December, the 30-year fixed mortgage has increased in each of the last three months, rising to 3.08% in March. “We’re going to see more erosion of affordability if this trend in mortgage rates persists,” he said. 

“The Wisconsin economy is faring better than the national economy, with a much lower unemployment rate in the state than in the U.S.,” said David Clark, Marquette University economist and consultant to the WRA. The seasonally adjusted Wisconsin unemployment rate stood at 3.8% in March, only up slightly from the 3.2% rate in March 2020. In contrast, the U.S. unemployment rate was at 6% in March 2021, up from 4.4% a year earlier. “Although the state is still down almost 100,000 private nonfarm jobs over the last 12 months, the progress in the COVID vaccination rate is a good sign that the state economy will continue to grow,” said Clark. He noted that robust growth in the national economy is expected for the first quarter of 2021, creating some concerns that the economy could overheat and generate inflation. “We’ve been lucky to have annual inflation rates below 3% since 2012, but the combination of an economy which has been expanding since the third quarter of 2020, and a significant stimulus bill increasing spending in the economy will put pressure on prices,” said Clark. In March, the annual rate of inflation increased to 2.6% from 1.7% a month earlier. “If inflation does pick up, look for mortgage rates to also increase,” he said.

“Even with significant housing price pressure, Wisconsin housing remains affordable, but the window to get a great mortgage rate may be closing, so working with a REALTOR® who is experienced is important,” said Theo. He indicated that preparation is critical. “Buyers need to be pre-approved with their lender, and sellers need to be ready to move quickly when their home sells,” he said.

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