2014 December Home Sales Report
Housing Market Ends Strong in 2014
Date: January 19, 2015
MADISON, Wis. – The housing market ended 2014 on a strong note with both existing home sales and median prices higher in December, according to the most recent analysis of the state’s housing market by the Wisconsin REALTORS® Association (WRA). Home sales in December rose by 2.1 percent compared to December 2013, and median prices rose 4.3 percent to $145,000 over that same time frame. For the year, home sales in 2014 were slightly below a very strong 2013 market, down just 1.5 percent; but prices were higher in 2014, up 3.1 percent to an annual statewide median of $148,000.
“Despite a slow start due to harsh winter weather early in the year, 2014 rebounded nicely and ended with an excellent December and a very good final quarter of the year,” said Dan Kruse, WRA board chairman. Kruse noted the fourth quarter of 2014 was the strongest since 2005.
With home prices up again in December, median prices have also grown for 33 of the last 34 months. “A 3.1 percent price increase over the year is good news,” said WRA President and CEO Michael Theo. “For three years in a row, home prices have kept pace with inflation without seriously impacting housing affordability,” Theo said, noting the annual rate of inflation throughout 2014 ranged between one and two percent. “This is a sustainable growth pattern.”
The Wisconsin Housing Affordability Index stood at 235 in December 2014. This index measures the percent that a household with a median family income can afford to purchase of the median-priced home with a 20 percent down payment and a 30-year fixed-rate mortgage at current rates. The 235 score in December 2014 is close to the index score of 230 of December 2013. The slight improvement in affordability results from several factors, according to Theo. “Improvements in income over the past year, combined with a slight reduction in the mortgage rate and only modest increases in prices, have kept our housing very affordable,” he said. By comparison, the November Housing Affordability Index for the nation stood at 168.6 and was at 223.8 for the Midwest.
Looking back at 2014, Theo said, “the market is finally getting back to normal in a number of ways.” The first indicator of a normal market, Theo noted, is a drop in foreclosures. In 2014, foreclosures were down 26.5 percent compared to 2013 and are essentially at pre-recession levels for the first time since the recession began. Foreclosure levels averaged 11,219 homes between 2001 and 2006; Wisconsin had 11,439 foreclosures in 2014. “While the availability of foreclosed homes presents buyers with opportunities, they [foreclosures] can be toxic for neighborhoods, so it’s good to see them back to normal levels,” said Theo.
Second, when accounting for regular season variation, statewide inventory levels are relatively stable and have been since 2012. In December, 7.5 months of supply was available, which is essentially a balanced statewide market.
Third, the labor market continues to improve with the unemployment rate falling to 5.2 percent in November even as the labor force has been steadily growing. “Clearly we are creating jobs at a pace high enough to more than satisfy the new entrants into the labor force,” Theo said. This is in contrast to the early post-recession period when the unemployment rate only fell when workers left the labor force. Finally, while prices have not fully returned to pre-recession levels, they have made up considerable ground. The average median-priced home in 2007 stood at $162,400 and fell 18.9 percent to $131,800 by 2011. In contrast, the 2014 median price of $148,000 means the market gained back about half of the decline in prices due to the recession.
“When you consider that prices in 2007 were likely inflated as a result of looser lending practices, we are probably much closer to a normal price today given current lending standards,” said Theo.
The WRA predicts a good housing market for 2015. “Overall, we believe that 2015 is shaping up to be a good year, given the low interest rates, low expected inflation due to falling energy prices, high affordability of housing and an expanding economy,” said Theo. Still, he cautioned potential buyers not to stay on the sidelines too long as interest rates are likely to increase in the foreseeable future. “The Fed has already signaled the possibility of raising short term rates as the economy continues to grow, and this eventually will mean higher mortgage rates,” he said. “This is an ideal time to realize the dream of homeownership while mortgage rates remain near historical low levels.”
The Wisconsin REALTORS® Association is one of the largest trade associations in the state, representing over 13,500 real estate brokers, sales people and affiliates statewide. All county figures on sales volume and median prices are compiled by the Wisconsin REALTORS® Association and are not seasonally adjusted. Median prices are only computed if the county recorded at least 10 home sales in the quarter. All data collected by Wisconsin REALTORS® Association are subject to revision if more complete data become available. Beginning in 2010, all historical sales volume and median price data at the county level have been re-benchmarked using the Techmark system which accesses MLS data directly and in real time. The Wisconsin Housing Affordability Index is updated monthly with the most recent data on median housing prices, mortgage rates, and estimated median family income data for Wisconsin. Data on state foreclosure activity is compiled by Dr. Russ Kashian at the University of Wisconsin–Whitewater