May home sales were down 6.9 percent compared to the same month a year earlier. But over the same time period, the median home price increased 3.8 percent to $150,000. The number of homes on the market remained roughly the same at about 54,000.
Michael Theo, the association's president and chief executive officer, said lending reforms may have slowed the market.
"The combination of a slight increase in mortgage rates, rising home prices and these tighter lending regulations may have kept some potential buyers out of the market so far this year," Theo said in a news release.
Nationally, home sales were down 7 percent in the first four months of 2014 compared to the same time in 2013.
Steve Lane, chairman of the association's Board of Directors, said fewer home sales with higher prices also could be a sign of what appears to be a stronger state economy and lower unemployment.
The association said housing had become slightly less affordable based on the Wisconsin Housing Affordability Index, which measures the portion of median-priced homes that households at the median family income can afford current mortgage rates with a 20 percent down payment.
But Theo said Wisconsin remained relatively affordable even with rising home prices.
"Both new listings and inventory levels were up slightly in May which should keep our housing affordability relatively high," he said.