Econ 101: Housing Demand Outpaces Supply
BY BILL RUBIN, EXECUTIVE DIRECTOR
There are fewer things hotter in the St. Croix Valley than home sales. Sellers may receive multiple offers, and in some cases, exceeding the list price. Home builders are part of this hot market, too. As fast as they can be built, new homes are sold and crews move on to the next one, just like in the good old days.
A big part of home buying revolves around personal confidence and a strong economy. If buyers are confident about their financial course in life, they’ll jump into the market and incur debt for fifteen or twenty years. Low borrowing rates add to the confidence of buyers. The state and national economies are strong. The top elected guy in Madison tweeted Wisconsin’s unemployment rate for April was the fifth-lowest in the U.S. The top guy also reported a record number of Wisconsinites working, estimated at 3,086,100 people, as well as a ‘Top 5’ labor force participation rate of nearly seventy percent.
The supply of homes listed for sale is impacting the hot market. A couple of associations track monthly and year-to-date home sales. They are the Wisconsin REALTORS® Association and St. Paul Area Association of REALTORS®. Agents in the St. Croix Valley have their choice of associations, but the summaries depict similar findings – the inventory of homes for sale has fallen and prices continue to rise.
Sounds like a case of simple economics akin to Econ 101. When the supply dips, the price rises, and vice versa. The St. Paul association says its inventory of available homes is currently below two months, reflecting a decline of twenty-five percent over the previous year. In January, the inventory had fallen to only forty-five days. The Wisconsin association reported a four month inventory of homes on the market across the state in April. This estimate is lower in urban areas and higher in rural areas.
Meanwhile, prices continue to rise. The Wisconsin association estimated St. Croix County’s home sales in April had a median price of $236,500. The year-to-date median price in St. Croix is $230,000. For perspective, the year-to-date median price in nearby Eau Claire County is estimated at $167,000 and the state’s median price is $174,000. The median price estimates from the St. Paul’s association is nearly identical to the Wisconsin group. Things do not improve westward into Minnesota. The year-to-date median home sale price for the 16-county metro area is $257,000.
As long as the inventory is low in the St. Croix Valley, buyers can expect to pay a premium. Buyers can expect a gain on their investments, however. With annual appreciation running between five and ten percent, maybe higher, home buying is a good investment. The longer prospective buyers wait, the more it will cost them. When in doubt refer to Econ 101.