Hoping to sell a single-family home or condo in Dane County or the surrounding region? You’re in luck. It continues to be a seller’s market.
Hoping to buy a home or condo? You’ll need some luck as a tightening supply and increased demand continue to push prices higher.
“Madison continues to grow,” said David Stark, president of Madison-based Stark Company Realtors. “We have a growing population of millennials who are mostly renters but more and more of them are buying and as time goes on more and more of them will buy. You can’t underestimate that as they add to the overall stock of homebuyers into the market.”
The inventory of Dane County homes for sale decreased to 2.16 months in January compared to 3.13 months in the same month in 2015 and 3.57 in January 2014. Six months of inventory is considered a balanced market.
In January, Dane County had an inventory of single-family homes of 1,433 compared to 1,835 a year earlier and 2,198 in January 2014.
“It creates a situation, especially now, that when a house comes onto the market if it is well-priced and well-presented, you have multiple buyers wanting to buy it almost instantly,” Stark said.
The same inventory decline has also spread out into the 17-county South Central Wisconsin Multiple Listing Service region, with 3.84 months of inventory in January compared to 5.26 in the same month in 2015 and 5.84 in January 2014.
In January, the South Central MLS region had an inventory of single-family homes of 4,756 compared to 5,824 a year earlier and 6,550 in January 2014.
“There has been a tremendous amount of buying activity even though inventory is historically low right now,” said Dan Miller, a Madison-based Realtor with RE/MAX Preferred. “Although supply is low, people are still buying. I believe as we go through the year, we’ll see a lot of evidence of prices rising throughout Dane County.”
If so, it would continue a trend. Dane County median home prices rose 5 percent in 2015 from $220,000 to $231,000. And median home prices also rose in all of the other 11 counties in the Wisconsin Realtors Association’s South Central region ranging from 4.6 percent in Jefferson County to 20.1 percent in Lafayette County.
Stark said one reason for a hot market is the continuation of low interest rates. Many economists thought interest rates for mortgages would start to trickle up when the Federal Reserve raised its key interest rate on Dec. 16, 2015, from a range of 0 percent to 0.25 percent to a range of 0.25 percent to 0.5 percent.
However, rates have little changed. In fact, a weekly survey of Dane County mortgage rates compiled by Oak Bank showed that the average rate for a 30-year fixed mortgage the week before the Fed announced the rate hike was 3.5 percent. The rate for Oak Bank’s survey remained at 3.5 percent on Feb. 19.
Miller said three other factors are impacting the local real estate market.
- Rising rents. “It’s not cheap to rent an apartment in the Madison area so a lot of people are saying, ‘Well, I might as well buy instead’ ” to build equity in a home.
- A slowdown in new home and condo building. Ten years ago, a large inventory of homes built up when the recession hit, Miller said. At the time, home building virtually crawled to a standstill. “Right now, it has recovered, but it is roughly half of what it was at its peak,” Miller said.
- Foreclosures had been a source of supply. Now, there are fewer distressed sales, Miller said. Dane County foreclosures dropped from a high of 1,768 in 2010 to 470 in 2015, according to statistics compiled by Miller.
Are the increased prices and tighter demand pushing home buyers to the surrounding regions? “I don’t think we are in any immediate danger of having something like that happen here, but I think that because the inventories are so short and because competition is so fierce we do hear some buyers suggest that it is hard to find something they really want and that they can afford,” Stark said. “We’re not outpriced, yet. But we’re not a cheap market, either. I think we’re OK. But you don’t want to see a couple years of 10 to 15 percent price increases. That could lead to difficulties.”
Tips for buyers
Buyers need to be prepared to be aggressive and expect that there might be some disappointment, but “if they stick with it they’ll find what they want,” Stark said. “The inventory will eventually come forward. It always does.”
Miller recommended serious buyers hire a good buyer agent. Miller recently pulled statistics on the Madison condo market. When he did, 46 percent of all the condo listings in Madison priced under $250,000 already had an accepted offer.
“If you were trying to schedule listings from Zillow or Trulia, 46 percent of those listings were already spoken for. You just didn’t know it, yet,” he said. A good buyer agent will help you focus on the listings that are truly available for sale, he said.
Miller also suggested that buyers:
- Get a mortgage pre-approval. Submit the pre-approval letter with your offer so your seller knows you are a serious and legitimate buyer.
- Ask their buyer agents for instant listing notifications to make sure they receive an email whenever a new listing or price reduction matching their criteria is posted to the MLS. “Then act quickly if an appealing listing hits the market,” he said.
- Write an offer that appeals to your seller’s needs. “It’s about more than price,” Miller said. “For example, do whatever you can to accommodate the seller’s preferred closing date.”
- Submit a personal letter with your offer. A home for sale recently received 13 competing offers. Only three of the buyers wrote a letter. The sellers accepted an offer that came from one of those three. “A personal letter helps you establish a connection with the seller. Submit a letter anytime you’re in a multiple-offer situation,” Miller said.
- Expand your search to include off-market properties. “There are several ways to go about this. A good buyer agent can help you implement a plan which identifies a few unlisted properties before anyone else knows they’re available for sale. This gives you the opportunity to make an
- offer without
- any competing buyers.”
Growth in state
Statewide, home sales in Wisconsin are also off to a fast start this year, with both the sales of existing homes and the median sale price increasing by more than 10 percent last month, according to the Wisconsin Realtors Association.
In the state, there were 3,659 closings in January 2016, compared to 3,313 closings in January 2015. The median price this January climbed to $148,700 from $135,000 last January.
“It was a solid December and a solid January, so it’s definitely a good start,” said David Clark, a Marquette University economics professor who analyzes the monthly data for WRA.
In 2015, the state’s housing market posted its best year in a decade, with home sales rising 11.4 percent and the median price of homes growing 5.1 percent. This January, every region of the state experienced growth in home sales, compared to January of last year, according to the association. The northeast had the most robust sales, with a 17.2 percent increase. Sales in western Wisconsin grew by 16.1 percent.
The Associated Press contributed to this article.
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