The Madison housing market is making headlines a lot lately.
Black Knight, a data analytics company that tracks home prices in the country’s 100 largest housing markets, found that Madison home prices jumped 1.65% between April and May of this year, the highest percentage increase in the nation and more than twice the national average increase of 0.71%. The data reflects a housing shortage in Madison that drives up home prices as demand exceeds supply.
The [Wisconsin Department of Revenue] estimates that residential property in Dane County went up by 12% in a year, with Madison home values going up that same percentage. Dane County’s median-valued home went from $407,000 to $420,000 between June of this year and June of 2022, according to the [Wisconsin] Realtors Association. … DOR estimates of one-year gains in residential property values in other Dane County communities: Middleton and Sun Prairie, 12%; Fitchburg, 15%; Monona, 11%; Stoughton, 16%; Verona, 13%; Waunakee, Mount Horeb, DeForest and Oregon, 14%, village of Cottage Grove, 19%, and Maple Bluff, 22%.
Indeed, as the Wisconsin Realtors Association recently noted, “weak inventories limited sales of existing homes and drove prices up significantly.”
Perhaps even more disheartening is a draft version of the City of Madison’s 2023 Housing Snapshot — prepared by the Department of Planning, Community and Economic Development to track housing market trends — which “found the average home in Madison is far out of reach for most,” according to another Isthmus.com report. “The median renter household in Madison looking to buy a house can afford a purchase price of $198,000, the median Black Madison household can afford a $159,000 home and the median white Madison household a $317,000 home. None of those numbers is close to the average home price in Madison, which now tops $400,000.”
As we head into the final four months of 2023, it’s important to note that Madison increasingly is one of the most popular places in Wisconsin to live — with thriving education, medicine and biotech sectors, plenty of outdoor recreation and entertainment options, and the distinction of consistently landing on several national “best city” lists. As a result, high home prices and low inventories are expected to continue in the Greater Madison area (and, to a large degree, throughout much of Dane County).
That reality, combined with interest rates flirting with the highest levels in two decades, make homeownership seem like an unattainable dream for some residents who feel priced out by the market. I’m being as honest and transparent as possible when I say this:
I don’t expect home prices to go down. I keep hearing from people who tell me, “I’m going to wait until the market crashes.” We’ve had two crashes in the last 100 years — the Great Depression of 1929 and the financial crisis of 2008 — so waiting for another one might not be practical.
My advice: Don’t despair.
Instead, start small and build equity. Consider beginning your homebuying journey with a condo or small house and eventually move into that three-bedroom-two-and-a-half-bath dream home with the fenced yard. There are affordable, high-quality condo units available in this market, just as there are desirable smaller homes. Some may need a little more TLC than others, but all will provide an opportunity to leave behind the rental rat race.
If, for example, you buy a home this year and live in it for five years, you probably can build up as much as 35% equity in that home. And when you decide to move out, you’ll have that additional money to put down on a newer, bigger and better house — putting you in a much stronger financial position than you are today.
While home prices eventually may plateau over the next several years, they won’t go down. Interest rates, meanwhile, are likely to fluctuate between the 7.35% or higher range and the sixes or even the fives. That, of course, will depend on the economy for the rest of 2023 and beyond.
Entering the home market, especially at a time like now, can feel scary and risky. But if you’re ready to literally make your move, I’m here to help every step of the way.