Fayetteville Arkansas, University of Arkansas--Old Main Overview

Fayetteville Arkansas, University of Arkansas--Old Main Overview
Overview of Fayetteville, AR

Sunday, August 13, 2006

Existing-Home Sales Flattening, Prices Cooling

It continues to be a buyer’s market. Prices are up only slightly from one year ago and interest rates are still affordable.

Last year sales were at record highs. This year existing home sales (throughout the U.S.) declined 1.3% in June 2006 compared to the previous month. Looking back to June 2005, June sales this year declined 8.9%.

Looking from a different perspective, housing inventory levels nationwide rose 3.8% at the end of June to 3.73 million existing homes available for sale. That represents a 6.8-month supply at the current sales pace. By contrast, in June 2005, there was a tight 4.4-month supply on the market.

It appears to me that the market is stabilizing. I don’t think anyone believed the market could continue sales at the record pace of the past several years.

This is good news for buyers who may have been discouraged by bidding wars during the hot market of the past. Now is a good time for buyers to find the home they want.

When inventories increase, buyers have more choices and more time to comparison shop. Sellers have come to realize they must be more competitive these days.

The above statistical information came from The National Association of Realtors®, report for June 2006.

To read the full report, click on:


Wednesday, August 02, 2006

Arkansas Has Budget Surplus of $402 Million

The bad news is: Arkansas has a reputation as a relatively poor state with a long list of needs from roads, sewers, and infrastructure in general to improvements in education, helping the needy, and everything in-between.

The good news is: Arkansas has a budget surplus of more than $402 million for the fiscal year ended June 30, 2006. As you can imagine, everyone wants a piece of the pie.

Many of the ideas are worthy of consideration. Using part of the surplus to create a “rainy day fund” is certainly an excellent idea. Just because income exceeded expenses this year doesn’t necessarily mean next year will as rosy.

Governor Mike Huckabee believes a good portion of the surplus should be refunded to taxpayers. The governor says the refund could be handled in various ways: state income tax reduction, reducing or eliminating the sales tax on food, or even a direct rebate to taxpayers. So far the legislature has been in no hurry to do anything.

Arkansas has become increasingly dependent on the sales tax. Arkansans pay sales tax on just about everything except medical care and prescriptions. The bare essentials - food, clothing, and utilities - are taxed by the state, county, and city. Add those taxes together and you will quickly see that cities such as Fayetteville and Springdale have sales tax rates in excess of 9%.

As we all know, the sales tax is regressive. Poor people need essentials just as much as their more affluent neighbors but they have to pay a proportionately higher percentage of their income for them.

I’ve also heard talk about eliminating the sales tax that manufacturers pay on utilities. Most states do not have a similar tax so this makes Arkansas less attractive to manufacturers who may be considering a move.

Education is another high priority. In recent years, we’ve spent a lot of money for improvements from kindergarten through university levels but capital improvements have been falling through the cracks. It’s reasonable to assume the entire surplus could be spent for education without fulfilling every need.

Other ideas also have merit, especially for NW Arkansas: infrastructure and affordable housing. I have written previously about both subjects but I can’t say it too often. NW Arkansas is in gridlock. New roads, widening of existing roads, toll roads, overpasses, bypasses, etc., no matter what you call it, we need to build it. Large projects such as the Highway 412 bypass are only dreams at this point. Funding does not exist to even buy the land.

NW Arkansas has a growing population of homeless people and affordable housing is practically non-existent. Part of the surplus could be used to help feed and train people so they can get jobs. Then help them with down payments and/or subsidized interest rates to get them off the streets and into housing.

As I understand it, the state used to give turnback funds to the cities, but they have not been awarded since 1986, when cities were allowed to enact local sales taxes to add on to the state sales tax.

Perhaps it is time to turn back some or all or the surplus to the cities to use as they see fit. They know better than the state what is needed at the local level.

While I know it cannot happen, I would love to see the entire surplus sent to NW Arkansas. NW Arkansas’ booming economy helps the entire state. We pay a proportionately higher percentage of taxes to the state than the other areas. We need help with infrastructure now if our economy is to continue expanding.

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Affordable Housing

Recent studies indicate that the term “affordable housing” is becoming an oxymoron.

The National Association of Realtors® surveyed 1000 people in June 2006. By a 2-1 ratio, respondents believed that high monthly payments were the biggest obstacle to buying a home.

The perception used to be that the down payment and closing costs were the biggest obstacles to home ownership. Now people are worried that monthly income cannot be stretched to meet monthly bills.

In addition to the mortgage payment itself, people worry about the cost of putting gasoline in their car, the ever-increasing price of utilities, rising property taxes, escalating healthcare costs, and higher insurance premiums.

If they have an adjustable rate mortgage, they know that soon that payment will also be higher.

For Middle Americans, home ownership is not only their dream but also the surest way to build wealth. Many feel that dream is no longer reachable.

The hurdles to home ownership are complex. However, Los Angeles Mayor Antonio Villaraigosa succinctly summed up a large part of the problem, “…the fact that wages haven't kept up with the cost of real estate." While average hourly wages have risen about 20% since 2000, the national median home price has soared 55%.

Another large part of the problem is escalating land prices in most of the country, and NW Arkansas is no exception. Even as recently as 3-4 years ago, a few local builders were still building so-called "starter" homes. These were somewhat basic, but usually had about 1000-1200 square feet, 3 bedrooms, 2 baths, and ceramic tile in the wet areas. These were usually available in outlying areas like Elkins and other smaller towns. Even in some of the major towns, there were homes for under $100,000. I can remember some new homes costing even significantly less than that.

Builders are no longer able to build “starter homes.” Because land is so expensive, builders are forced to build a larger home on a smaller lot and charge more for it. The new "affordable" homes start at about $150K to $160K in the major towns of NW Arkansas, although it is possible to purchase a less expensive, smaller home in some of the outlying areas, such as Siloam Springs, Lincoln, and Gravette, etc.

Another reason for higher home prices is the impact fees many communities charge to help pay for everything from roads and sewers to police and fire protection to parks and other municipal facilities. The fees, which amount to several thousands of dollars, are passed on to the homebuyer.

Thus, for people of modest means, increasingly this means they must choose whether to live in their own home farther from their work or pay rent and live closer. But with gas prices so high, living farther away means extra transportation costs and that increases monthly expenses. People who would have purchased a home in the past no longer qualify for these more expensive homes.

In the meantime, the glut of high-end homes continues.

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