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The awful weather throughout southern U.S. has affected so many lives with devastating results--tornadoes, extremely heavy rains, flooding, hail and associated miseries of all kinds. Just a week ago the tornado in Joplin, Missouri caused at least 135 deaths. And other tornados affected communities in central Arkansas.
Such extreme weather also causes indirect damage to the housing market. It is next to impossible to show homes in such threatening conditions. If any good can be found at all, it’s that heavy rain clearly illustrates which properties are subject to flooding.
The latest reports shows sales of homes in Arkansas down 23% in April compared to April 2010.
In Benton County, sales were down 18% with 303 homes sold vs. 371 in April last year.
Washington County results were similar: sales down 19% with 205 homes sold vs. 254 last year.
Results do vary by town, however. Although Benton County as a whole experienced fewer sales, in Bentonville itself, sales were up in April compared to last year: 72 compared to 67 last year, according to the NW Arkansas MLS. Similarly Rogers had the same number of sales both years in April—98.
For Fayetteville, 108 homes were sold last year in April compared to only 82 this year. And Springdale was also down significantly, 115 homes sold last year in April compared to 98 this year.
But we must remember that due to government tax credits for home purchases in the early months of 2010, April had more home closings that any other month last year.
The housing market in NW Arkansas does exhibit seasonal characteristics—more sales in the spring and summer, fewer in the winter. And although the lower sales in April this year have not all been weather-driven, it is often a factor. I am hoping for some calm, comfortable weather soon. So far, 2011 has been breaking the weather records.
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Saturday, May 28, 2011
Saturday, May 14, 2011
Housing Sector Still Struggles, But Some Bright Spots Appear
On Friday I went to the Quarterly Business Analysis Breakfast sponsored by the U of A Center for Business and Economic Research. I like to go to these events because usually Kathy Deck, the director of the Center, gives incisive and informative economic data about Arkansas as a whole and NW Arkansas in particular. This usually confirms and explains what I see on a day-to-day basis as a real estate agent in the trenches.
Her presentation on Friday was basically positive, compared with previous meetings. The economy is getting better, according to the indicators she talked about--measures like GDP growth, Consumer Sentiment, Inflation, Unemployment, Job Growth, and the like.
The key to the real estate market in NW Arkansas is employment, and it appears that we're ahead of the curve compared to the rest of the state and to the US as a whole. If we don't have jobs, people will not want to move here. And if we don't have jobs, even people already here won't be able to buy a house. Increased employment will bring more home sales in the short term, as will seasonal factors.
But the construction sector will not lead economic growth in the near future according to Deck, rather it will follow it. And the tax credit of last year is long-since past. In addition, there is a large inventory of homes on the market, not to mention a full pipeline of foreclosures. These will continue to put downward pressure on prices.
The housing situation may be a bit brighter for some. It depends largely on an individual’s financial status, goals, and whether he is buying or selling. Home affordability in NW Arkansas, as well as nationwide is higher than it has been for a long time. And interest rates remain very low.
Nationwide the glut of unsold houses on the market is shrinking and absorption is occurring. No matter who you are, that is good news. But the glut (including foreclosures) has to be sold off before prices can stabilize. Prices will not begin to rise again until that glut is substantially gone.
Unfortunately, foreclosures are still occurring at a fairly high rate and for a time may even increase once mortgage holders work through the investigations into their sloppy foreclosure practices of the past.
Recent national statistical measures indicate sales are increasing when compared month over preceding month. However, year over year sales are down because sales in the early months of 2010 were artificially higher due to the homebuyer’s credit, which expired last June.
In some markets, prices seem to be at or near the bottom and investors are snapping up homes to rent out while they wait for the inevitable price increases.
Meanwhile, renters are feeling the impact from many sides. Owners who lost their homes through foreclosures were forced into the rental market. Builders stopped building new apartments when the economy turned sour. Some older apartment buildings have been torn down while other apartment complexes were turned into condos. More people wanting to rent fewer apartments means higher rents. The sad part is many lower income families are paying as much as 50% of their income on rent and utilities.
The March 2011 interest rate on a 30-year fixed rate mortgage was 4.84% - an excellent rate. But banks and mortgage companies are requiring higher credit ratings and higher ratio of income to monthly mortgage payment. I’m sure this is their response to the ridiculously low standards they used in the past – the standards that caused the whole housing debacle in the first place.
If lenders would return to the ratios that were in place for years before the debacle, more credit worthy borrowers would qualify to buy a home.
As the economy continues to improve, buyers will become more confident about the positive aspects of home ownership. There are already more buyers out looking, and as the spring progresses and the economy continues to improve, this will increase.
The housing sector will probably continue to struggle for awhile yet, but there are bright spots and I am seeing glimpses of more to come.
For more information:
Arkansas Business Journal
RISMEDIA
National Association of Realtors
Washington Post 1
Washington Post 2
Her presentation on Friday was basically positive, compared with previous meetings. The economy is getting better, according to the indicators she talked about--measures like GDP growth, Consumer Sentiment, Inflation, Unemployment, Job Growth, and the like.
The key to the real estate market in NW Arkansas is employment, and it appears that we're ahead of the curve compared to the rest of the state and to the US as a whole. If we don't have jobs, people will not want to move here. And if we don't have jobs, even people already here won't be able to buy a house. Increased employment will bring more home sales in the short term, as will seasonal factors.
But the construction sector will not lead economic growth in the near future according to Deck, rather it will follow it. And the tax credit of last year is long-since past. In addition, there is a large inventory of homes on the market, not to mention a full pipeline of foreclosures. These will continue to put downward pressure on prices.
The housing situation may be a bit brighter for some. It depends largely on an individual’s financial status, goals, and whether he is buying or selling. Home affordability in NW Arkansas, as well as nationwide is higher than it has been for a long time. And interest rates remain very low.
Nationwide the glut of unsold houses on the market is shrinking and absorption is occurring. No matter who you are, that is good news. But the glut (including foreclosures) has to be sold off before prices can stabilize. Prices will not begin to rise again until that glut is substantially gone.
Unfortunately, foreclosures are still occurring at a fairly high rate and for a time may even increase once mortgage holders work through the investigations into their sloppy foreclosure practices of the past.
Recent national statistical measures indicate sales are increasing when compared month over preceding month. However, year over year sales are down because sales in the early months of 2010 were artificially higher due to the homebuyer’s credit, which expired last June.
In some markets, prices seem to be at or near the bottom and investors are snapping up homes to rent out while they wait for the inevitable price increases.
Meanwhile, renters are feeling the impact from many sides. Owners who lost their homes through foreclosures were forced into the rental market. Builders stopped building new apartments when the economy turned sour. Some older apartment buildings have been torn down while other apartment complexes were turned into condos. More people wanting to rent fewer apartments means higher rents. The sad part is many lower income families are paying as much as 50% of their income on rent and utilities.
The March 2011 interest rate on a 30-year fixed rate mortgage was 4.84% - an excellent rate. But banks and mortgage companies are requiring higher credit ratings and higher ratio of income to monthly mortgage payment. I’m sure this is their response to the ridiculously low standards they used in the past – the standards that caused the whole housing debacle in the first place.
If lenders would return to the ratios that were in place for years before the debacle, more credit worthy borrowers would qualify to buy a home.
As the economy continues to improve, buyers will become more confident about the positive aspects of home ownership. There are already more buyers out looking, and as the spring progresses and the economy continues to improve, this will increase.
The housing sector will probably continue to struggle for awhile yet, but there are bright spots and I am seeing glimpses of more to come.
For more information:
Arkansas Business Journal
RISMEDIA
National Association of Realtors
Washington Post 1
Washington Post 2
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