Wisconsin home sales slipped in February, even as prices continued climbing well above the rate of inflation, according to an analysis of housing-market data from the Wisconsin Realtors Association.
The analysis found that home sales fell 2.6 percent in February compared with the same month in the previous year. Meanwhile, the median price across the state rose 6.1 percent to $154,900 over that same time period. The annual rate of inflation in January was only 2.5 percent.
Erik Sjowall, WRA board chairman, expressed surprise at the dip in homes sales, even in a month where there typically isn’t much activity in the market.
“With 30-year fixed-rate mortgages in the low 4 percent range for the first two months of the year, you would think that this would have been a strong February for sales, but sales fell short of their February levels of 2016 in most regions in the state,” he said in a news release.
Sjowall largely blamed the state’s tight inventory of available housing stock as the reason for the slip in homes sales. The WRA analysis found that the last two months have marked the tightest inventories on record. February only had about 4.5 months’ worth of supply statewide — and inventories get even tighter in metropolitan areas, which had only 3.4 months of available supply last month.
“Inventories naturally fall in the winter months, but these are the tightest February inventories seen since the WRA began tracking available supply in 2009,” Sjowall said.
This limited supply, coupled with strong demand from buyers, is putting “significant price pressure” on the market, Michael Theo, president and chief executive of WRA, said in the release.
Association officials predict that homes will become less affordable, especially since mortgages rates are expected to increase over the next year.
Mortgage rates have risen nearly three-quarters of a percent from 3.44 percent in July to 4.17 percent in February. Theo noted that the Federal Reserve is expected to increase the federal funds rate by at least another half-percent by the end of the year, which will continue to push mortgage rates up.
“We’ve been lucky to have low mortgage rates and modest improvements in income to help offset the steadily rising prices, but affordability will almost certainly suffer when the cost of credit increases,” he said.