Dane County Real Estate: Trends and Insights as We Look Ahead to 2025

As we near the end of 2024, it’s a good time to take a closer look at the state of the Dane County real estate market. Understanding where we’ve been can provide solid context for where we are going heading into 2025.

Interest Rates

In our July edition, we shared that many experts were forecasting mortgage rates to stay around 6.5% for the remainder of the year. For a moment, it seemed like those predictions might be wrong—as we all got excited when the 30-year fixed mortgage rate dropped nearly 1% between the time that issue reached your mailbox and mid-September. During that time rates briefly dipped below 6%, which felt like a welcome relief for many buyers who had been waiting on the sidelines.

However, the excitement was short-lived. While we’ve seen a bit of a rollercoaster ride with rates recently, they’ve since settled back in around the 6.25% to 6.5% range with most local lenders. For those who missed the chance to lock in at 5.75%, it’s understandable if you’re feeling some regret—especially given how volatile the rate environment has been. But looking at the bigger picture, this is still a positive shift compared to the highs we experienced since 2022 when rates have periodically spiked above 7%.

Looking ahead, 2025 is showing promise. Most forecasts suggest that rates will hover between 5.5% and 6%, which is a much more manageable range for many buyers. The days of 7%+ rates may be behind us—at least for the foreseeable future.

Keep in mind, as mortgage rates decrease, borrowing becomes more affordable, which inevitably brings more buyers into the market. While this is great news for potential homeowners, increased competition among buyers can often lead to rising home prices and continued limited inventory.

Inventory

The housing market crash of 2008 was a result of multiple factors, including a flood of distressed home sales and a significant surplus of homes available for sale.

To put it into perspective, in August of 2008, there were just over 5,200 active properties for sale in Dane County. Fast forward to February 2022, and the picture couldn’t have ben more different. At that point, Dane County had just 259 available homes—a staggering 95% decrease in available inventory from the 2008 high point.

Clearly, our current housing market is facing a vastly different challenge: not an oversupply, but a severe shortage of homes for sale. This scarcity, when coupled with the exceptionally low interest rates we saw just a few years ago, created an environment of extreme demand and limited supply, leaving many buyers struggling to find homes.

Fortunately, there’s some good news on the horizon. Since March of this year, we’ve seen a steady increase in available inventory. As of now, the number of active listings hovers around 1,000 homes, which is a significant improvement from where we were just a few months ago. However, while this is a positive shift, we’re still not quite where we need to be. A more balanced market—one that continues to favor sellers but allows for a healthier dynamic—would ideally have around 1,500 active listings.

As we look ahead, the goal is to maintain this upward trend in housing inventory, providing more opportunities for buyers while keeping home values strong. A market with more available homes not only benefits buyers but also helps sellers by creating a stable environment where prices remain competitive and sustainable.

Inventory has begun to outpace sales in recent months. However, let’s remember that 2017-2019 were still markets high in competition and very favorable to home sellers.

Values

The increase in mortgage rates has made home buying more challenging, but if you’ve been following the Dane County real estate market, you’ve likely noticed something else: home values have continued to skyrocket since the pandemic. While it may feel surprising, the reality is that home values almost never go down. Yes, they can dip during times of economic crisis—like the 2008 crash—but over the long term, home values historically trend upward.

To give some context, since 2000, Dane County has only experienced four years of depreciation, all during the recession of 2008. This drop was caused by a flood of distressed home sales, which created an oversupply of properties, dragging down the values of surrounding non-distressed homes. But even with that setback, home values have bounced back and grown steadily over time.

In fact, from 2013 to 2023, we saw an average annual appreciation rate of 6.7%, with 2021 and 2022 experiencing over 10% growth each year. As of this writing in 2024, the median sales price for homes in Dane County has risen to $444,850—an 8.5% increase from 2023. While this growth is impressive, it’s also clear that appreciation needs to slow down to maintain affordability. If we were to repeat the rapid appreciation of 2021-2024 over the next four years, the median price could hit $630,000, a level unattainable for most households.

Despite this, it’s hard to imagine a scenario where home values stop appreciating or reverse into a decline anytime soon. Yes, inventory is creeping up, but it's important to remember that leading into the 2008 crash, Dane County had five times as many homes available for sale. Today, the supply still falls far short of demand, keeping upward pressure on home prices. While we do expect appreciation to moderate, the underlying fundamentals of low inventory and strong buyer demand are likely to keep home values climbing steadily.