September 2022 Home Sales Report Tight Inventory and Lower Affordability Hurt Home Sales Date: October 18, 2022
September 2022 at a glance
Existing home sales dropped significantly in September because of higher home prices, rising mortgage rates and tightening inventories. The number of closings slid 14.7% in September compared to that same month in 2021. The very low inventory levels continued to push home prices up, with the median price increasing 10.2% over the past 12 months to $270,000.
Third quarter home sales were at the lowest level since 2014. The weak third quarter of 2022 pushed year-to-date sales down 9.3% compared to the first nine months of 2021. The median price for this period increased 10% to $265,000 relative to the January-through-September period of 2021.
For the second straight month, there were more monthly sales than new listings of homes. As a result, inventory levels continued to fall statewide. Specifically, total inventory dropped 25% in September compared to a year earlier, and this pushed months of supply down to just 2.6 months, an 18.8% reduction in just 12 months. This is strong evidence of a seller’s advantage since it is well below the benchmark of six months of supply that indicates a balanced market.
The seller’s market was strongest in metropolitan counties, which had just 2.4 months of supply in September. This was followed by micropolitan counties, which represent smaller cities and towns with a population between 10,000 and 49,999 residents. Those counties had 2.7 months of supply. Finally, the smaller, rural counties had slightly more inventory at 3.8 months. However, all these county classifications saw their inventory tighten over the last year.
Mortgage rates continue to increase, surpassing the 6% mark for the first time since fall 2008. The average 30-year fixed mortgage rate was 6.11% in September, which is more than twice the rate in September 2021, which stood at 2.9%
Affordability continued to slip statewide. The Wisconsin Housing Affordability Index gives the fraction of the median-priced home that a buyer with median family income can afford to buy, assuming a 20% down payment and the remaining balance financed by a 30-year fixed-rate mortgage at current rates. The index slid 30.5% to just 141 in September from 203 a year earlier.
Analysis from the experts
Demand Softening but Remains Stronger Than Supply
"Even though declining affordability translates into fewer potential buyers, there remains considerable unmet demand among millennials. That demand outstrips the available supply in the market, which is why inventory continues to shrink."
Brad Lois, 2022 Chairman of the Board of Directors, Wisconsin REALTORS® Association
Inflation Remains High, Which Will Lead to Tighter Credit Conditions
"The U.S. inflation rate has been above 8% since March, despite efforts of the Fed to rein in inflation pressures by raising the short-term Federal Funds Rate. While these rate increases can take time to slow the economy enough to bring inflation down to its target of 2%, it’s clear that the Fed intends to stay the course, so we should expect ongoing rate increases in the 0.75% to 1% range for the foreseeable future. This translates to an increased likelihood of recession in the near-term."
Dave Clark, Marquette University Economist and WRA Consultant
Wisconsin Affordability Will Continue to Erode
"Even though Wisconsin housing remains more affordable than the national average, affordability has fallen over the past year, and unfortunately, we expect that trend to continue. We have seen some improvement in median family income over the past year, but it is not sufficient to offset the rapid increase in both home prices and mortgage rates."
Michael Theo, President & CEO, Wisconsin REALTORS® Association