Wisconsin Real Estate Trends, 2^nd Quarter 2006

 

Although Wisconsin real estate sales numbers are declining when compared to the same numbers from 2005, there is no reason to believe the sky is falling.

 

Wisconsin’s 3.8% drop in number of existing homes sold in the 2^nd quarter of 2006 is a relatively small drop compared to our neighbors in Minnesota and Michigan. Minnesota saw a dramatic 19.6% drop from a year ago, and Michigan’s numbers declined by 14.6%.

 

This should come as no surprise. For years, Minnesota’s housing market has been characterized by shortages and thus, rapidly increasing prices. As the shortage of housing in Minnesota lessens, it only seems natural that any price increase brought about solely by the fact that there is a shortage would vanish. It’s supply and demand. Where there were once few available houses, now there are plenty, and the prices are falling correspondingly. It’s the same pattern we see in many other high-growth areas like Florida (down 26.7%) and Nevada (down 23.5%).

 

Michigan is most likely in a different situation because so much of Michigan’s economy is tied to the fortunes of the big three automakers, which have not been performing well.

 

Other Midwestern neighbors fared within 5% of 2005: Illinois was down 4.7% from a year ago while Iowa and Indiana were up 3.8% and 4.8% respectively.

 

All in all, the housing market is cooling. But much of Wisconsin never saw a large housing shortage and ensuing runup in prices that are the cause of the precipitous fall in some areas like Minnesota.

 

Finally, we must recognize that 2005 was a record year for home sales. The 2005 record was preceded in the previous four years by four new records.

 

Kiplinger predicts almost 6.5 million existing homes will be sold in 2006. While that will fall shy of the record 7 million plus homes sold set in 2005, this 2006 total would eclipse the totals of every year except 2004 and 2005.

 

Bottom line: Home sales are slowing but not crashing. We’re better off here in Wisconsin than folks in other areas are, but some places are better off than we are. And just because 2006 will not be a new record doesn’t make it a bad year.