Tuesday, January 21, 2014

Housing boom? Not in most Wisconsin places

The Wisconsin Realtors Association just had their December and year-end home sales reports, and we had a bit of a rebound in the home market for 2013.
2013 was a robust year for Wisconsin’s housing market, with both sales and prices increasing by solid margins, according to the year-end housing report released by the Wisconsin REALTORS® Association (WRA). Existing home sales were up 10.8 percent compared to 2012, and median prices increased 7.2 percent to $143,000 over that same time frame.

“Strong sales dominated 2013, which is remarkable given that this is compared to 2012, which was also a very good year for the housing market,” said Steve Lane, chairman of the WRA board of directors.According to Lane, existing home sales were up in every region of the state in 2013 relative to the previous year....

Lane noted housing sales were strong despite raising interest rates and prices. “Mortgage rates have increased a full percentage point since January, and median prices have grown consistently throughout the year,” Lane said. “Yet the entire state posted genuine gains in 2013, a trend we hope and believe will continue into the new year,” Lane said.
State newspapers ran with these numbers, trying to show that the state's economy was rolling in the right direction. However, what's not being said is that the home sales increase isn't evenly-distributed around the state.

In particular, Dane, St. Croix, Pierce Counties have had housing growth that outpaces the rest of the state. Those 3 counties have the 3 lowest unemployment rate in the state, and include the Madison area (Dane County) and the two Wisconsin counties closest to the Twin Cities (St. Croix and Pierce Counties). Both of those metro areas are noticeably more progressive and stronger economically than much of the rest of Wisconsin (gee, think that might attract potential homeowners?), and once you take out these three counties, the state no longer has double-digit growth for 2013.

Total home sales, 2013 vs. 2012
Dane County- 7,618 vs. 6,156 (+23.75%)
St. Croix Co.- 1,418 vs. 1,263 (+12.27%)
Pierce County- 486 vs. 435 (+11.72%)
Rest of Wisconsin- 60,081 vs. 54,918 (+9.40%)

The same pattern repeats when we look at home prices, and the Twin Cities-area counties in particular are having a boom. While Dane County's growth is less than the state as a whole, the prices of Dane County homes are significantly higher than those in the rest of the state, which drives up the median price statewide. This relationship is compounded when you realize Dane County is taking up an increasing amount of total sales in the state.

Median home sales price, 2013 vs. 2012
St. Croix Co.- $175,000 vs. $147,500 (+18.64%)
Pierce County- $150,000 vs. $135,000 (+11.11%)
Dane County- $210,746 vs. $200,000 (+5.37%)
Wisconsin Statewide- $143,500 vs. $133,900 (+7.17%)

By contrast, Northern and Northeastern Wisconsin are especially lagging other parts of the state. Northern Wisconsin had sales up 5.7% with prices up a paltry 1.7%, and Northeastern Wisconsin had home sales up 7.4% and prices up 4.2%. So the wire story about home sales and prices showing strong growth in Wisconsin might come as news to those in the 920 and 715 area codes, and is one of several economic indicators that show many of those areas being left behind in the Age of Fitzwalkerstan.

Lastly, the end of 2013 wasn't as strong as the start of it, as the Realtors' numbers showed that things may have slowed down in the 4th Quarter. Sales only increased to 15,115 to 15,013 compared to the 4th Quarter of 2012, the smallest year-over-year gain in 3 1/2 years, with half of the state's regions suffering declines. Maybe that's a one-quarter blip, but with interest rates creeping up and the weather being colder than normal, we could see things slow down at least for a little bit, and if that leads into a slight change in consumer sentiment, the cycle could reverse.

Bottom line- let's cool out before we officially call it a housing boom in Wisconsin, especially given the evidence that the gains in home sales and prices are heavily concentrated into a few, growing areas, with much of the rest of the state showing relatively small growth levels.

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