Despite rising incomes, a 50% jump in Wisconsin home prices poses big challenge for buyers

It's become much harder for middle-class Wisconsin residents to buy a home in the past several years, according to a new report from the Wisconsin Policy Forum.

In just five years, the median home sale price in Wisconsin rose by more than 50%, according to the report, which examined how housing costs changed between 2017 and 2022.

Wisconsin's home prices have been deemed a crisis by state leaders, who are scrambling to encourage more home construction across the state.

The Wisconsin Policy Forum report breaks down which parts of the housing market are facing the biggest crisis, analyzing home prices and rents by county.

Here are three key takeaways from the report:

Home prices rose much faster than incomes

Although many Wisconsin households saw their incomes rise during the pandemic, it still wasn't enough to keep pace with runaway home prices.

In 2022, the median home in Wisconsin sold for $265,000 — up from $172,900 in 2017.

That's a 53% price increase in just five years. Meanwhile, the median household income in Wisconsin only rose 19.7%.

"For those who want to buy a home, the hurdle has gotten significantly larger," said the report's lead author Joe Peterangelo, a senior researcher with the Wisconsin Policy Forum.

Rents have remained more affordable, with notable exceptions

Rents have been rising, too, but not nearly as fast as home prices. Wage gains among Wisconsin's renting households have helped offset those rising costs.

In 2022, the median Wisconsin renter was paying a monthly rent of about $992, including utilities — compared to $819 a month in 2017.

That's about a 21% rise in rent costs. In those same five years, the median income of Wisconsin renters rose 22%, keeping pace with the rise in rents.

This finding came as a surprise to Peterangelo and his research team, given the fast-rising rent costs in Madison's metro areas.

However, Peterangelo cautioned, there are signs that many Wisconsin renters are under financial strain, and that rents have begun to creep up quickly in recent months.

In the Madison and Milwaukee areas, in particular, renters are struggling.

In Dane and Milwaukee counties, more than half of renters in 2022 were rent burdened — meaning they spent more than 30% of their income on rent each month.

In Milwaukee, that's likely because a significant share of renters are low-income, the report found.

In the Madison area, relatively high rents are likely to blame, the report found. Dane County's median rent hit $1,258 in 2022, compared to the statewide median of $992.

Housing costs have risen significantly in the Madison area

Both home prices and rents have skyrocketed in the greater Madison area.

In Dane County in 2022, the median home sale price was 4.6 times the area's median income, the report found.

The Northwoods, too, have seen their home prices rise far above median incomes, according to the report.

The Northwoods vacation home market, however, might be skewing those numbers, Peterangelo said. It's still unclear from the data how demand for vacation homes is affecting full-time residents in northern Wisconsin, he said.

Housing shortage is squeezing first-time homebuyers

Buyers wading into today's home market have far fewer homes to choose from. That's for two main reasons:

• Years of sluggish construction: After the housing market meltdown of the mid-2000s, home construction slowed significantly, and it still hasn't recovered to pre-recession levels.
• Sellers on the sidelines: Mortgage rates fell below 3% during the pandemic, but are now hovering near 7%. Many homeowners who locked in favorable rates just a few years ago are reluctant to sell and give up their low-cost financing.

This summer, state lawmakers took steps to encourage more home construction, offering incentives to build more affordably priced housing.

Cities across Wisconsin, including Madison and Milwaukee, are also considering changes to their zoning codes that would allow for more home construction.

It's too early to tell what effect those changes will have on Wisconsin's housing market, Peterangelo said.

But, the report concluded, "it likely will take multiple strategies and many years to improve housing affordability in Wisconsin."