Monthly Market Update: Housing Statistics for Dane County for December 2018
The year ended with sales up over 2017 in November and then down slightly compared to 2017 in December, but overall on a positive note with the third highest ever number of sales in Dane County at 8002 (behind 2016 with 8085 and 2017 with 8079). The inventory dropped in a seasonally appropriate way, and less drastically than in 2017, slipping to 1.63 months of inventory in December whereas 2017 was at 1.47 month (a balanced market is considered to be 6 months of inventory when you take the average rate of sales per month and divide that into the number of available listings).
The continuing story is the steadily rising prices with the year end median sales price climbing to $278,000 over $264,000 from 2017, a 5.3% increase. The interest rates slipped for the second month in a row, down from 4.9% to 4.63% in November and 4.45% by the early part of January.
There are a lot of unknowns with the economy right now, and as I write this the partial Federal shutdown drags on. What types of effects and the severity of the effects remain to be seen. Forecasts about an impending slow down have been tempered recently and there are indication that any recession may be delayed until as late as next year and it is predicted to be mild. The inventory will almost certainly continue to be tight in 2019; buyer demand is expected to continue to be strong; but with forecasts of slowly rising interest rates the rise in home prices may remain moderate.
Summary of the data for the month of December 2018:
- Number of sales of single family homes: 443 (492 in 2017)
- Number of new listings: 318 (313 in 2017)
- Total listings available end of October: 1084 (991 in 2017)
- Number of months inventory available: 63 mos. (1.47 mos. in 2017)
- Interest rates approximately 4.45%
- Median price of single family homes and condos YTD sales: $278,000 ($264,000 in 2017)
Recently I heard a rather interesting interview the main point of which I will share with you. It was an interview with Professor Jesse Keenan, from Harvard University, an expert in the budding field of climate adaptation. Climate Adaptation is a fancy way of describing how we will prepare for and cope with climate change. Some examples of climate adaptation are improving sea walls and raising structures to deal with sea level rise, or changing building codes to cope with hurricanes or wildfires. One of the more straight-forward kinds of climate adaptation is called climate migration, or once again put simply, moving out of an area because of the effects of climate change.
Here is where things get interesting. Professor Keenan points out that two of the least affected regions of the country, and therefore two of the regions most appealing to people who are migrating due to climate are the Pacific Northwest and the Great Lakes Region, which could fairly be said to include Dane County. It impossible to get any accurate numbers on specifically how many people might move to our area. But we can get some general notions about the overall scope of the situation. There are estimates that some 13 million people could end up migrating due to climate change by the end of the century. Shorter term estimates are harder to come by.
I wanted to put this in some perspective so I turned to Madison’s Comprehensive Plan and saw that they forecast an increase in Madison’s population by some 70,000 in the next twenty years. One of the many reasons that explains the city’s recent rise in popularity is the rapid growth in the technology sector. It is important to note, however, that the methodology used to forecast the growth over the next twenty years did not consider any effects from climate migration. We’re already experiencing some of the effects of rapid growth, with an increase in population of around 50,000 over the last twenty years. These effects can be seen in tight housing and rental inventory, increasing housing costs, and a growing need for infrastructure repair and expansion. Consequently, if we receive any significant amount of climate migration it is likely to create very noticeable demands in all these areas, especially housing.
I’m not bringing this up to alarm anyone, but rather to point out that one of the potential benefits of population growth in our area is that anyone purchasing property in the next few years and of course current property owners will likely see the value of their investment continue to rise for the foreseeable future. We’re living in interesting and perhaps challenging times, and there may be big changes in store for us. I see it as part of my role to highlight the interplay between these current events and the real estate market. As always, I invite your comments.