The head of Madison-based Stark Company Realtors says recent trends suggest the upward pressure on home prices “seems to be easing” despite ongoing inventory shortages.
In a recent newsletter focused on south- central Wisconsin’s real estate market in the third quarter, Stark Company Realtors CEO David Stark noted homes have been going for “slightly more” than the list price since the pandemic. These “overbids” tend to ramp up in the spring and summer, he wrote.
But this year, he says the average overbid “fell recently by more than it had in the past three years,” with final sale prices averaging slightly lower than the list price in August and “just over” the list price in September. He points to this trend, along with somewhat higher inventory levels, in arguing rising prices may be close to leveling off.
“There are more instances of properties sitting for longer on the market if they’re not properly priced,” Stark wrote. “While it always varies from property to property, it does appear that prices are starting to reach the limit the market can bear, leading to hope that increases may moderate next year.”
Still, he cautions this is “a possibility, not a prediction,” as housing levels on the market are around half what they were five years earlier. Plus, with the greater Madison area projected to continue gaining population in the coming years, demand is expected to remain strong regardless of mortgage rate changes or other factors, he wrote.
He attributes current low inventory levels and home price growth to mortgage rates being too low for too long, noting inventory levels have begun to recover in the more “normal” mortgage rate range around 6%.
Around the start of October, the peak period for housing inventory, Dane County had about 950 properties on the market, exceeding peaks of around 700 homes for each of the previous three years.
“We currently sit at just under 2 months of inventory in Dane County, and about 2.5 in Sauk/Columbia, after spending the last three years with half that much,” Stark wrote. “For comparison’s sake, we peaked at about 2.3 months in Dane County in 2019, the last pre-pandemic year, and about 3.5 months in Sauk/Columbia. Frankly, even that felt low at the time.”
At the start of the year, Dane County had just about 500 homes on the market, and Stark hopes that will be around 700 homes at the start of 2025 before increasing from there. Even if the county sees up to 1,200 homes at the peak period of next year, he expects prices will continue to increase.
“How much depends on where inventories land, and how low mortgage rates go,” he wrote. “The long term average for price increases in Dane County is between 4% and 5% per year. If we can keep prices somewhere in that range next year, we’ll consider that another victory.”
See the newsletter.
