What happened in the Dane County real estate market in 2016? What can we expect for the rest of 2017?
In 2016, we set a new record for the all-time number of sales for single-family homes and single-family condos, finishing the year with 8,073 sales. December was also a record month. In fact, sales during that month were 17% higher than December 2015.
We accomplished this even with a restricted amount of inventory. That restricted inventory put pressure on prices, and we saw an increase in the median sales price of about $13,000. As far as the level of inventory for homes and condos, at the end of 2016, we had a supply of 1.78 months. This was 25% less than what it was at the end of 2015.
What does all this mean? It’s generally thought that a balanced market (e.g. favoring neither sellers nor buyers) has about a six-month supply of inventory. We finished the year squarely in a seller’s market, and we’re still in a seller’s market. At the end of January, our inventory level was at 1.5 months, which is even less than what we ended 2016 with. This lack of inventory will probably put further pressure on pricing and cause it to continue to increase.
When rates go up 1%, mortgage payments go up 10%.
However, we also have to remember that interest rates, despite an uptick after the election, are still at historically low levels. Any type of rise in interest rates hurts buyers’ affordability. For every 1% increase, a buyer can afford 10% less of a home. At these current levels, then, it’s still a great time to purchase a home.
In summary, 2016 was a great year, and we expect more of the same in 2017. It should be a great year for sellers, but we also envision a great year for buyers as long as interest rates remain low.
If you have any questions about our market or need any assistance, please feel free to reach out to me. I’d be happy to speak with you.