the last few months, all the markets have shifted, indicating buyers are getting some traction. If this trend continues it would provide further support for these local markets moving into Stage 2 of the Seller’s Market. Depending on how strong the increase in supply is during the next year could determine how long before it starts trending toward the buyers. Table 10 is the second key indicator to understand the trends in the local market. The Sales Price to List Price ratio is very significant. If this ratio is much lower than 100% it means that sellers seem to have less leverage and are getting more desperate to sell. As this number approaches 100%, it reinforces the idea that a Seller’s Market exists. Table 10: Sales Price/Listing Price Ratio Sales Price/List Price Ratio
The low supply of homes is certainly a factor and really has led to a perfect storm for sellers of homes. The limited inventory of homes is clearly a contributing factor to the higher prices. High demand with low supply has led to a strong seller’s market. Most indications show that we are not in the second stage seller’s market yet, or if we are, it is the early stage. The Days on Market (DOM) indicator starting to move up again in our local markets is the best indicator that we are perhaps moving into the second stage. Table 11 gives an interesting look at how prices have changed over the last decade.
Table 11: Median Prices
2020
2010
% Increase
Table 11: Median Prices 2020
2020
2010
% Increase
Median Prices National Wisconsin Local Marshfield Central Region Stevens Point
$300,200 $220,000 $165,000 $143,500 $205,000 $186,000 $134,000
$172,000 $143,000 $117,000 $114,900 $130,000 $129,450 $ 87,000
75% 54% 41% 25% 58% 44% 54%
Year 2017 2018 2019 2020
Marshfield Stevens Pt
Wausau Wis Rapids
96 97 97 98 98
97 98 99 99 99
97 98 98 99 99
97 97 98 98 99
Wausau
Wisconsin Rapids
2021 YTD
Direction STABLE
STABLE
STABLE
STABLE
So, do we have a housing bubble?
The SP/LP ratio has been stable for the last 3 years, and because of the high number it clearly indicates that all four cities are well into the mid-range of a sellers’ market. Conclusion Analyzing the real estate market can be extremely complex as can be seen by the various indicators. Identifying trends is easy compared to trying to draw meaningful conclusions based on objective data. Understanding the Supply & Demand for housing allows us to draw conclusions about what is happening in each market. The data indicates that both Prices & Quantity Sold are increasing in most markets leading us to conclude that the dominant factor is rising demand. This is the only scenario that explains the direction of prices and quantity. What specifically is driving the high demand? Probably the demographics of the millennials moving into prime home buying range, combined with the best affordability numbers caused by low interest rates and relatively high- income growth over the last few years. But this is just speculation. Even more remarkable is that even Global Pandemic could not dampen the demand!
Probably not! A bubble usually implies irrational, unexplainable behavior. From our analysis, we have identified normal, understandable, economic, and demographic relationships that give a clear indication of where housing is in the typical real estate cycle. Based on the analysis, it does not seem to be at a peak and given the long-term nature of real estate cycles, it is unlikely that the bubble is going to burst anytime soon. I would like to thank the National Association of Realtors and Wisconsin Association of Realtors for the use of their data. The local data was provided by the Central Wisconsin Board of Realtors with the valuable assistance of Broker/Owner Natalie Aneskavich from Lakeland Real Estate in Stevens Point.
Central Wisconsin Report - Fall 2020
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