Low Mortgage Rates Lead to High Home Sales and Refinancing Volume In Wisconsin

Undeterred by the coronavirus pandemic, Wisconsin’s housing market set a record for sales over the summer and is poised to continue its strong performance in the new year as long as mortgage rates stay low. 

The low interest rates have made homes in the state more affordable, even though a limited inventory of houses and condos for sale in many markets has been pushing up prices. 

“If I had to put my finger on one thing, it’s the excellent interest rates,” said longtime real estate agent Peter Stefaniak, of The Stefaniak Group LLC in Milwaukee. “You talk to anybody in the title business and the lenders right now, and they are swamped, not only with purchases but refinancing. They are extremely busy.” 

The 2.94% average rate for a 30-year fixed mortgage (with 0.8 points) posted in August was the lowest on record with mortgage buyer Freddie Mac, whose statistics go back to 1971. But the average rate was even lower in the week ending Oct. 1, in which a rate of 2.88% with 0.8 points was logged, according to Freddie Mac. 

“Those low mortgages rates – as long as they stay low – ought to continue to lead to a relatively robust housing market,” said economist David Clark, executive associate dean of Marquette University’s College of Business Administration. 

Clark, who analyzes monthly sales of existing homes and price data for the Wisconsin Realtors Association (WRA), said the tiny rates were the chief reason for record sales of existing homes in the state in the June-through-August period. In that span, 27,795 closings took place, a 2.8% increase from the same period last year. 

“There is solid demand, and that’s what is a little bit surprising in that we’re coming out of a pandemic,” Clark said. 

Clark said the demand continues to be stimulated by mortgage rates that make houses and condos affordable to more people, even as prices inch upward. In addition, he said, jobs have continued to return since the end of the initial economic lockdown prompted by the pandemic. 

According to the WRA, through August, the median price of homes sold in Wisconsin was $216,500, or nearly 9% higher than $199,000 in the first eight months of 2019. 

Refinancing also remains strong, as homeowners who obtained mortgages not so long ago are taking advantage of the low rates to reduce their monthly payments and the term of the mortgage. 

“People are saving hundreds of dollars a month on refinances. Some people are cashing out to pay off other debt, saving lots of money on a monthly basis,” said Michael Kellman, senior vice president for consumer lending at Brookfield-based North Shore Bank. 

On the home purchase side of mortgage lending, demand is so strong that potential buyers really need to be pre-approved for a mortgage before they even begin shopping for a home, Kellman said. When a desirable house comes onto the market, multiple bids – sometimes over asking price – are placed quickly, he said. 

Stefaniak said competition is high as demand exceeds the supply of homes, and it has been since spring. 

“When COVID first started to hit right before let’s say St. Patrick’s Day, it got really quiet for about three weeks or so. Then about middle of April the phone started ringing and people started coming out,” Stefaniak said. “They were being careful: wearing masks and bringing sanitizer and wearing gloves, and no open houses – showings strictly by appointment and saying don’t bring mom or dad or the kids, strictly the buyers. And the majority of the sellers were OK with that because they wanted to sell their house. Before long it was back and up and running and crazy good. And it’s been like that all summer here.” 

Realtor Steve Bergelin, of Realty Executives in Pewaukee, said although low rates and tight inventory have driven the market for homes priced at $300,000 or less for the past few years, higher-priced properties listed at $500,000 and up are in demand now as well. Bergelin said he’s “never seen anything close to this type of hysteria in my 28 years of real estate experience.” 

“Homes that are priced right in these categories are receiving multiple offers within 24 to 48 hours, and many are over the asking price,” Bergelin said. 

Clark said that with the Federal Reserve focused more on employment than inflation at the moment, it doesn’t appear a significant rise in interest rates is coming soon. 

“My guess is we’ll continue to see low rates on credit – certainly short-term credit but also long-term credit – for some time,” Clark said. 

Paul Gores is a journalist who covered business news for the Milwaukee Journal Sentinel for 20 years. Have a story idea? Contact him at paul.gores57@gmail.com 

By, Ally Bates