The Dane County real estate market is always changing, but one dynamic we can continue to count on is low inventory. Here are a few reasons why the supply of Madison area homes and condos will remain low for the foreseeable future.
Why Madison area housing supply will remain low next year
1) A low supply of new construction homes and condos
Although it may seem like there are a ton of new construction homes and condos being built in Dane County, much of the new construction growth in the area has been for commercial space and apartments. New home construction has been running well below historical highs for the last 14 years (see graph below). New condo construction has been very scarce and insufficient to meet the demand in the marketplace.
2) A tight rental market
Even though new apartment complexes are being built all over Dane County, the local apartment vacancy rate is decreasing. Dane County's growing population is absorbing the supply of new construction apartments, and then some. Consequently, rents will remain high in the Madison area, which will motivate many apartment dwellers to pursue home ownership over rental housing. This is one of several reasons why we expect demand for home and condo housing to be strong in 2020.
3) An empty foreclosure pipeline
Madison area foreclosures are currently trending along a 20-year low. This is a good thing and a sign of a healthy economy, but it's also another reason why home and condo supply will remain low next year.
4) Home owners locking in and staying put with low interest rates.
Mortgage rates have fallen a lot over the last year (see the chart below from Freddie Mac), and many home owners have refinanced and locked in. These owners have a strong financial incentive to stay put in their current home and benefit from lower monthly payments. The recent surge in mortgage refinancing will limit new listing activity in 2020 and help ensure home and condo inventory remains low.
The bigger impact
Low new home construction, a tight rental market, an empty foreclosure pipeline, and the recent surge in mortgage refinancing are four big reasons why the supply of Madison area homes and condos will remain low for the foreseeable future. Because of this we're predicting local home and condo prices will increase once again in 2020. Stay tuned for our 2020 real estate predictions, which we'll be releasing very soon.
