What Happened to the Spring Market?

Dated: May 13 2024

Views: 239

By Jade Goodhue

 

April, typically one of the best-selling months for homeowners, slowed precipitously in April. The real estate market showed unusual signs of strength as early as January, did sellers waiting for the ‘spring market’ miss it or will it resume in May?  There’s no straightforward answer as markers of a slowdown on the horizon are becoming increasingly apparent, influenced by several impactful factors: higher housing prices, a surge in homes for sale, escalating interest rates, and this being an election year. While elevated housing prices are beginning to dampen buyer enthusiasm, as affordability becomes a significant barrier. Meanwhile, an increase in listings is offering more choices, thus reducing the frenetic competition among buyers that previously drove prices upward. Concurrently, rising interest rates are adding another layer of complexity, increasing the cost of borrowing and further influencing buyer decisions. This confluence of factors is reshaping market dynamics, creating a landscape where strategic decisions and timing are more crucial than ever for both buyers and sellers.

 

As you can see from the table below, the market stalled across the board in Walworth, Kenosha, and Racine County. Pending home sales stalled by at least 50% in April of this year compared to April of last year and by at least 20% year-to-date. 

 

Source: Metro MLS

Is Buyer Demand Slowing?

 

On the surface, homes listed for sale seem to be hanging out on the market uncomfortably longer than they have in the past couple of years. However digging into the numbers that make up the ‘average,’ this is because of a significant price disparity of what price range buyers are buying homes in, and what homes on the market are being listed for sale at.

Higher Housing Prices

 

The market is stalling because of the substantial difference between the median prices of homes that are selling versus homes that are being coming on the market for sale. The difference between the median list price and the medium sale price is nearly $100K year-to-date in Walworth County, $40K YTD in Kenosha County, and $50K YTD in Racine County. 

Source: Metro MLS

 

As you can see from the graph below, the listing and sale price spread on average is widening as compared to a year ago. We’ll want to keep watch of this.



Source: Metro MLS

 

Fortunately and unfortunately, Wisconsin is one of the states that saw the biggest increase in home prices across the Nation. 

 

Higher Interest Rates

 

The 30-year average mortgage rate is at about 7.22%. It’s down from a high of 18% since the 1980s, and down from 7.79% last October in 2023. But combined with high prices, the combination is straining buyers.

 

Source: St Louis Federal Reserve

More Listings

 

As the residential real estate market begins to transition from a seller's market towards a more balanced market with months of inventory approaching four months as shown in the graph below, the dynamics for buyers and sellers evolve significantly. 

 

Source: Metro MLS

 

After years of high buyer demand and low inventory, the increase in listings will finally provide more options to buyers, tempering the frantic pace and extreme competition of previous months. The number of homes listed for sale is finally going up, especially as new construction is coming online for sale. 

 

Source: Metro MLS

 

Moreover, construction is finally on the rise across all three counties. 

 

 

Buyers benefit from a slight easing in prices and may encounter fewer bidding wars, giving them a better chance to deliberate on their purchases. Sellers, while still in a favorable position, may notice a shift in urgency among buyers and should adapt by refining their pricing strategies and ensuring their properties stand out in quality and value. 

Are Sellers Reducing Prices and Buyers Getting More Price Concessions?

 

While we’re still technically in a seller’s market, it’s a weak one and arguably a balanced market according to the sold-to-list ratio below. The sold-to-list price ratio is a critical metric in the residential real estate market that the final sale price of a home to its original listing price, serving as a barometer for how much buyers are willing to pay relative to asking prices. A high ratio often indicates a seller's market where homes sell at or above the list price due to strong buyer demand and limited inventory, suggesting a competitive market environment. Conversely, a lower ratio can signal a buyer's market, where buyers have more leverage and room to negotiate, leading to homes selling for less than their listed prices. Understanding this ratio helps both buyers and sellers gauge market conditions, set realistic expectations, and strategize effectively during negotiations.

 

In actuality, homes below the $399K are still in HOT demand, but homes priced above are more lukewarm. The problem is the majority of homes sitting on the market are above that the price point which is skewing the numbers.

 

How is the Foreclosure Market?

 

The silver lining is that Wisconsin is one of many states that have seen a 0-0.1% increase in year-over-year change in overall mortgage delinquency rate as of February of this year.

 

Historical Data Trends of Real Estate and Presidential Elections

 

The notion that a presidential election is a determinant of housing market conditions is more myth than reality.  Analyzing data from various election years, there is no consistent pattern indicating significant deviations in housing prices or sales volumes that can be directly attributed to the outcome of presidential elections. For instance, during the 2000 election and subsequent recount, no notable disruption in housing trends was observed, despite the significant political uncertainty. Real estate markets are complex systems influenced by a myriad of economic factors. While elections can affect regulatory and fiscal policies, these changes are generally absorbed into the market gradually and are overshadowed by more significant economic drivers. 

Bottom Line

 

As we navigate through this nuanced, transformative phase in the residential real estate market, both buyers and sellers must stay informed and flexible, leveraging the slowly equalizing forces to make strategic decisions.

 

As the residential real estate market undergoes perceptible changes and potential slowdown due to higher housing prices, an increase in listings, and climbing interest rates, there remains a silver lining. Despite these challenging conditions, foreclosures continue to stay at all-time lows. This trend highlights the resilience of the market and the effectiveness of recent financial safeguards and homeowner support mechanisms. The belief that presidential elections significantly influence housing prices and the broader real estate market is a common misconception. For prospective buyers and existing homeowners, this stability in foreclosure rates offers a reassuring sign of underlying market health, suggesting that while the market adjusts to the new economic realities, the foundational aspects remain strong. This balance ensures that even in times of slowdown, the market is structurally sound, providing opportunities and security for those engaged in it.


If you’re looking to sell or buy a home in SE Wisconsin, give us a call or text at 262.204.5534 or email me at jade@legendaryrealestateservices.com.

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Chris Devincentis & Jade Goodhue

Jade and Chris co-founded Legendary Real Estates Services during the start of the 2020 pandemic. With Chris’s background as a real estate agent and broker since 1990, and Jade’s background....

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