Home sales in metro Milwaukee market were down 10.6% in June compared to a year ago, as the market has cooled from the blistering pace set in 2021, according to the Greater Milwaukee Association of Realtors.
The decline is more a reflection of a comparison against a white-hot sales pace a year ago, rather than a sudden slowdown in the market, the Realtors said.
The downturn also isn't tied — yet — to sharply higher mortgage rates because most deals were closed before higher rates kicked in.
June marked the fourth month in 2022 with decreased sales relative to 2021, "...again, due to 2021’s exceptional performance," the Realtors said.
Through the second quarter of 2022, "sales had their second best stretch ever," the group said. "The 10,058 sales in 2022 were second only to 2021’s 10,450."
Lack of inventory stymies buyers
New listings in the Milwaukee metro area were down 21.5% in June for the fourth month in a row.
Again, the numbers were up against a blistering pace in 2021. "Last year, sellers jumped into a hot market and pushed listings up to 3,506 from 2,654 in 2020," the Realtors said.
The listings number came "back down to earth this past June to 2,751," according to the Realtors.
Still, that's not even remotely close to satisfying demand.
"The perpetual scarcity of inventory plaguing the market will continue well into the future," the Realtors said.
"To reach a balanced market — commonly understood to be six months of inventory — the four county area (Milwaukee, Waukesha, Ozaukee and Washington counties) needed 6,730 additional units through June," according to the group.
A 'systemic problem' is driving up home prices
The Realtors group, in announcing the June numbers, said that there simply are not enough houses or condos to serve the market.
"The systemic problem with the market is the lack of new construction of single-family houses and condominiums, and over-production of apartments," the group said.
That, combined with a demographic surge of Millennial and GenZ buyers, have contributed to the historically tight market.
"If the region does not create additional supply in the form of more single-family and condominium units, thousands of would-be homeowners will be forced into rental units, foregoing the opportunity to build wealth through a home’s equity and all of the other benefits of homeownership," the Realtors said.
Demand exceeds supply, prices soar
The average home sale price in southeast Wisconsin soared nearly 10% during the second quarter across southeast Wisconsin, which includes Milwaukee, Waukesha, Ozaukee, and Washington plus Racine, Kenosha, and Walworth counties.
The average sale price in the four-county Milwaukee metro in June was up 9.5% to $392,545, compared with 2021.
Across all of southeast Wisconsin, the average sale price was up 8% vs. 2021.
Average U.S. price hits all-time high
Sales of previously occupied homes in the U.S. slowed for the fifth consecutive month in June from the previous month, the National Association of Realtors said Wednesday.
Existing home sales in June fell 14.2% from last year.
Month-to-month, the rate fell 5.4% in June compared with May to a seasonally adjusted annual rate of 5.12 million. That’s lower than what economists were expecting.
June’s national sales report is evidence that the housing market, a key driver of economic growth, is retreating from the blistering pace of recent months.
"We view the rapid acceleration in home sales over the past two years, which was generated in part by the pandemic itself and in part by low interest rates, as a temporary surge," said Ruben Gonzalez, chief economist for real estate company Keller Williams, in an e-mail.
Demand is forecast to remain strong.
"It seems likely that we will return to a pace of home sales more consistent with pre-pandemic levels, but we also see long-term demographic trends which will continue to keep demand for homeownership growing over the next decade," Gonzalez said.
Like southeast Wisconsin, even as home sales slowed, prices kept climbing.
The national median home price jumped 13.4% in June from a year earlier to $416,000. That’s an all-time high according to data going back to 1999, the NAR said.
Higher mortgage rates will have impact
The Milwaukee Realtors group said rising mortgage interest rates, brought about by the Federal Reserve's efforts to control soaring inflation, had yet to show up in the June sales numbers in southeast Wisconsin.
That's because June sales were negotiated weeks earlier, "...when buyers were able to lock in lower interest rates," the Milwaukee group said. "The impact of increasing interest rates is yet to be seen."
Mortgage buyer Freddie Mac said Thursday that he average interest rate on a 30-year fixed-rate home loan rose to 5.54% this week, from 5.51% last week. That's just shy of double the 2.78% rate a year ago.
Most economists expect the Federal Reserve to raise its borrowing rate another half-to-three-quarters of a point when it meets next week, which could send sending mortgage rates higher.
Nationally, the increase in mortgage rates will almost certainly cool the housing market.
That, in turn, may result in soaring home prices leveling off.
“Consumer concerns about rising rates, inflation and a potential recession are manifesting in softening demand,” said Sam Khater, chief economist for Freddie Mac. “As a result of these factors, we expect house price appreciation to moderate noticeably.”
The Mortgage Bankers Association said Wednesday that mortgage applications have declined 19% from last year and refinancings are down 80% to a 22-year low.
"We have seen a substantial slowing in the pace of home sales in June, and we believe it’s likely to persist throughout the peak selling season," Gonzalez said.
"Double-digit, year-over-year declines in homes sales reflect both the stifling impact that the rise in mortgage rates had on demand, but also the frenzied pace of sales seen last year."
The Associated Press contributed to this report.
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This article originally appeared on Milwaukee Journal Sentinel: Realtors: Lack of new homes in Milwaukee market is 'systemic problem'