This is the time of year when many people think about entering the housing market. The holidays are over, they’ve been cooped up inside for months and they’d like to avoid the spring rush.
But know this: The south-central Wisconsin market is not like it was even a few years ago. The days of a home for sale bringing in 70 potential buyers resulting in 20 offers — most of them significantly over asking price — are long gone. So are 3% interest rates.
As recently as 2021, a $500,000 home with a 30-year fixed mortgage at 3% interest meant a monthly payment of $2,108 (principal and interest only). With interest rates hovering around 8% until recently, a similar monthly payment ($2,091, to be exact) on the same type of loan will get you a $285,000 home.
That’s why, even though there were more new home listings across Wisconsin in 2023 than in 2022, overall home sales were down 17.5%, according to the Wisconsin Realtors® Association. In short, there are a lot of people who want to buy homes who simply aren’t doing so right now unless they absolutely must, because the difference between a typical $500,000 home and a typical $285,000 home in, say, a Dane County community like Sun Prairie, is quite stark — in everything from age and square footage to condition and location.
Interest rates have dropped, as of this writing, to about 7% for a 30-year fixed mortgage, but they are likely to stay well above that historic 3% threshold through at least 2030, according to former U.S. Treasury Secretary Lawrence Summers.
So what does this mean for buyers and sellers in south-central Wisconsin in the early months of 2024? Sellers should not expect to receive the kind of exorbitant, way-over-asking-price offers they might have if they’d put their home up for sale three years ago. And buyers need to realize that waiting for interest rates to come down might keep them stuck in their existing home for a long time.
Meanwhile, the median price of a home also increased in 2023 — up 8% statewide over 2022, with the steepest climb happening in south-central Wisconsin. Granted, that’s probably in large part thanks to Dane County, which is a pricier market than others in this region. But it also has plenty to offer, including Madison, which continues to be one of the best cities in America with a thriving economy; first-class shopping, dining and entertainment options; abundant outdoor recreation activities; and more.
Regardless of where you’re entering the market this year, it’s critical to engage with a real estate professional who can help you navigate it strategically — whether setting an asking price that is both fair and reasonable if you’re selling or finding the best home at the right price if you’re buying. That person should be an experienced professional who knows the market, is committed to making clients happy and isn’t chasing a fast buck.
As always, I’m here for you.
(Photo of Hermie by shadowdogphotography.com)