MANITOWOC (NBC 26) — High mortgage rates are making it increasingly difficult to buy a home in Northeast Wisconsin, where buyers face a market challenged by both affordability and limited supply.
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The 30-year fixed mortgage rate in Wisconsin stood at 7.49% as of September 25th — part of a three-year stretch of elevated rates that have continued to inch higher.
Stephen Troveh, an assistant teaching professor of economics at UW Green Bay, said the region is dealing with compounding pressures.
"The problem that we are seeing here in northeastern Wisconsin is not only the issue of affordability but a supply issue as well … so the market is dealing with both a demand and a supply shock at the same time," Troveh said.
The state median home price hit $362,000 in August, up more than 50% from 2021, according to the Wisconsin Realtors Association.
Troveh pointed to several factors driving the affordability crisis.
"3 or 4 years ago people were able to lock in the rate around 2, 3, 4, percent so that is a problem for the demand side," Troveh said. "Households are also facing other affordability crisis in terms of the high inflation rates within the economy."
"We do not know when rates are going to be down … the 30 year fixed mortgage rate continues to trend upwards," Troveh added. "Wages are not increasing fast enough to keep pace with the rise in inflation."
Troveh said those dynamics are part of what's known as the "lock-in effect" — homeowners who secured low rates years ago may be reluctant to sell and take on a significantly higher rate, keeping some homes off the market.
There is also what experts call a "lock-out effect," which hits first-time buyers especially hard.
Kris Remiker, a broker manager at Century 21, said newer buyers are struggling to compete.
"I think the people that are having a difficult time getting into houses are the first time home buyers .. it's definitely possible for first time home buyers to get into a house, it might just be a little more difficult if they are competing against a cash offer," Remiker said.
Those without significant cash reserves or with lower incomes often find themselves outbid by older residents looking to downsize.
"Not a lot of stuff is going for under list price right now, most is going for over list price," Remiker said. "It's tough for someone who is just on their own."
Troveh said he expects high rates to persist over the next few quarters — if not years — before any downward trend emerges.
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