May 2020 Home Sales Report
Pandemic Slows May Home Sales
Date: June 15, 2020
MADISON, Wis. – The severe economic consequences of COVID-19 had a
significant impact on existing home sales in May, according to the Wisconsin
REALTORS® Association (WRA). In its monthly analysis of home sales, the
WRA found May home sales fell by 25.8% on a year-over-year basis. Median prices
continued to rise at a robust pace, increasing 6.2% to $214,000 in May relative
to May 2019. Comparing the first five months of 2020 to that same period last
year, existing home sales slipped 5.5% and the median price rose 7.9% to
$205,000.
“When the president announced the National
Emergency in mid-March, followed shortly thereafter by the Safer at Home order
by the governor, we expected to see home sales fall dramatically beginning in May,”
said WRA Chairman Steve Beers. Regional sales in Wisconsin were remarkably
consistent with five of the six regions down between 20.2% and 25.5% over the
past 12 months. Only the Southeast region dropped by a slightly higher margin,
falling 30.5% over the May 2019 to May 2020 period. “Home sales that closed in
May were likely under contract in late March or early to mid-April, and this is
the time when a lot of potential buyers and sellers decided to sit tight,” said
Beers. He noted that we’re still in for a rough summer in terms of home sales,
but the re-opening of the state economy should help.
“Wisconsin REALTORS® are
carefully following CDC guidelines to ensure buyer and seller safety; and while
inventories remain tight, there are homes available, and mortgage rates have
never been better,” he said. The 30-year fixed-rate mortgage fell to 3.23% in
May, which is a new record low.
“Home prices are still
appreciating quickly, which isn’t surprising, given that inventories fell dramatically
in May,” said WRA President & CEO Michael Theo. Statewide, there were just four
months of available supply in May 2020, down from five months a year earlier. The
urban regions of the state were particularly tight, with just 3.3 months of
supply in metropolitan counties, suggesting a strong seller advantage. In
contrast, rural counties were more balanced with 6.5 months of available
inventory. “Even with decreasing supply and rapid price appreciation, Wisconsin
housing is still very affordable, thanks to record-low mortgage rates,” said
Theo. The Wisconsin Housing Affordability index shows the percent of the median-priced
home that a qualified buyer with median family income can afford to buy,
assuming a healthy 20% down payment and the balance of the home financed with a
30-year fixed-rate mortgage. The index fell just 2% from 199 in May 2019 to 195
in May 2020. “These excellent mortgage rates mean that affordability barely
changed even as home prices rose and median family income fell,” said
Theo.
“The longest economic expansion in
U.S. history is now over, and the economy is officially in recession,” said
David Clark, Marquette University economist and consultant to the WRA. The
National Bureau of Economic Research recently announced that the latest
recession officially began in February of this year. Statewide, the unemployment
rate dropped slightly in May from the previous month. The seasonally adjusted
rate dropped from 13.6% in April to 12.0% in May. “While the re-opening of the state
economy has helped, we still have a long way to go to return to pre-recession
levels of employment,” said Clark. Total nonfarm employment is down by more
than 387,000 jobs compared to May 2019, with the biggest share of job losses in
the service sector. “Recessions typically hurt the housing market when demand
tails off as the recession deepens, but there are reasons to suspect less
damage to markets in this recession,” said Clark. He noted that favorable
mortgage rates should keep demand from falling significantly, and the aging
baby-boom population will improve the supply situation over the next one to two
years. “We could be returning to a more balanced market,” he said.
Theo stressed that there remain good
opportunities for buyers in this market. “There’s no doubt that we still have tight
housing supply in the state, but a REALTOR® who is experienced can
still find the home that matches your family’s needs, and the record-low
mortgage rates have kept Wisconsin housing among the most affordable in the
country,” said Theo.