With housing prices on the rise and fewer homes being sold, Wisconsin faces a challenging housing market. Recent data highlights a significant drop in home sales, coupled with affordability issues that have persisted over time.
According to an August report by the Wisconsin Realtors Association, home sales in Wisconsin decreased by over 8% compared to the same period last year. Despite this decline, home prices have continued to rise, driven by limited inventory.
The concept of home affordability hinges on two main elements: the actual home price and what an average household can reasonably afford, factoring in interest rates. Kurt Paulsen, a professor of urban planning at the University of Wisconsin–Madison, explained on WPR’s “Wisconsin Today” that both home prices and interest rates have seen an upward trend.
“That means that the middle-income family in most counties in this state cannot afford the median-priced house,” Paulsen stated.
Despite the year-over-year drop in August sales, the overall home sales for the first eight months of 2026 showed a slight increase compared to the same period in 2025. However, Paulsen noted that current figures are still significantly lower than pre-pandemic levels.
Paulsen discussed the ongoing housing challenges in Wisconsin during his appearance on “Wisconsin Today.”
The following interview has been edited for brevity and clarity.
Supply and Demand Dynamics
Rob Ferrett: What is the supply and demand of housing in Wisconsin doing to home prices?
Kurt Paulsen: We have a long-term inventory issue — over the last 10 or 15 years, particularly in job growth counties, we’ve not built enough housing to keep up with demand. So that will keep prices inflated.
Paulsen highlighted that homes priced between $200,000 and $350,000 are in high demand but short supply, making it challenging to build new homes at affordable prices. High interest rates further complicate the situation, discouraging many potential buyers and causing current homeowners to hold onto their low-interest mortgages.
Interest Rates and Construction Costs
RF: Interest rates have been much higher in the past — almost 18 percent at one point in the early 1980s — and houses were still being built then. What is it that makes 7 percent seem prohibitively high for people right now?
KP: In the 15 years after the Great Financial Crisis of 2008, we had cheap money for 15 years, so interest rates were much lower. As you pointed out, we’re getting back to normal, and so it really does take people adjusting their expectations. I would say the other perfect storm of this situation is that the cost of construction is so high that even building new housing is just cost prohibitive for so many families.
RF: What is driving the high cost of construction?
KP: It’s everything. Since 2020, the cost per square foot is up about 50 percent, and that is because of everything from tariffs to supply chain issues to labor issues, the cost of lumber with Canadian tariffs, immigration enforcement for the construction workforce and an aging workforce in construction.
Paulsen explained that even with optimal zoning and financing, the shortage of construction workers poses a significant hurdle in building new homes.
Addressing Housing Affordability
Do you see any obvious solutions to housing affordability in Wisconsin?
KP: I don’t think there’s any low-hanging fruit. It’s a lot of things taken together over time that might move the needle a little bit. In high demand areas — Kenosha County, the Milwaukee suburbs, even in the Green Bay, Fox Cities and Madison areas — we just have to build a lot of smaller-format housing, smaller homes on smaller lots that are at a cheaper overall price. Even though the price per square foot is still pretty high, we just have to build a lot of those over the next 10 years.
In expensive markets, reducing lot sizes and expediting permit processes could encourage developers to build at lower price points. For smaller towns and rural areas, financial incentives might be necessary to offset land and infrastructure costs.
A new bill effective October 1, introduces residential tax increment finance districts, aiming to alleviate some of the financial burdens associated with housing development.
