First Quarter 2007 NW Arkansas Housing Market Update

According to the National Association of Realtors®, the GDP (Gross Domestic Product—or total value of goods and services produced in the US) grew at a slower than expected 1.3% in the first quarter of 2007, due in part to the housing slump across the nation.

On April 25 the National Association of Realtors® announced that sales of existing homes plunged 8.4% in March, the worst one-month decline in 18 years. The median price of an existing home nationally fell to $217,000, a 0.3% decline from March 2006. Inventories of unsold homes nationally rose to a 7.3-month supply, the highest level since October. New home sales in March rose 2.6% over February, but were down 23% from March 2006, the second weakest year-over-year sales performance since September 2001, according to an April 25 report from the Census Burea. Surprisingly, the median price nationally of a new home sold in March was $254,000, up 6.3% from the price of a new home sold a year earlier.

Home sales in NW Arkansas, as elsewhere, were down in the first quarter of 2007 compared to the last quarter of 2006. This is a normal seasonal occurrence, since the NW Arkansas housing market is largely weather driven, and we had awful, cold weather. But homes are now taking longer to sell due to elevated inventory in almost all price levels, with the average days on market (DOM) up in all of the NW Arkansas towns. The “buyer’s market” discussed in media reports does exist here, and with high inventory and falling prices, it might be a good time for buyers to purchase a home in NW Arkansas. Nevertheless, each town does have slightly different market trends.

An exception to what I have said above, Fayetteville actually experienced an increase in home sales in Q1 2007 with 258 homes sold (86 per month), compared to 248 homes sold in the Q4 of 2006 and the same number sold in the Q1 of 2006. As for prices, after a drop of almost 14 percent in the last quarter of 2006, the average price of homes sold in the first quarter of 2007 increased by almost 6% to $216,013. The median price of homes sold was $189,900, and the DOM was 137, up from 110 in the 4th quarter of 2006. The highest average sales price in the past couple of years was $236,616 in the 3rd quarter of 2005.

Springdale’s housing market is down from both the past quarter and from the same quarter last year. There were 275 homes sold in Q1 of 2007 compared to 283 in Q4 of 2006 and 313 in Q1 of 2006. Average DOM has increased to 132 over the past year from 111 in Q1 of 2006. The average and median sales prices have also decreased over the past year. Average sales price is down almost 8% compared to Q1 last year and almost 3% from the last quarter. The average sales price for Springdale during Q1 of 2007 was $160,882 after a peak in Q2 of 2006 of $181,380. The median price of homes in Springdale in Q1 of 2007 was $149,900—a decrease to the same level as in Q4 for 2005. It should be mentioned, however, that not only does the decreased average and median sale price reflect lower prices for homes, but also the increased availability of less expensive homes. This might be a good time to invest in a home in Springdale.

Bentonville is still the most expensive place to purchase a home in NW Arkansas, with an average sale price of $235,229 during Q1 of 2007, compared to $212,666 in Q1 of 2006. However, prices have dropped slightly from the highest average sale price in the past couple of years, which occurred in Q4 of 2006 at $238,659. However, the median sale price is now the highest it has been at $209,000, compared to $194,500 in Q4 of 2006 and $180,000 in Q1 of 2006. The median price represents the middle price of all homes sold, with equal numbers of more expensive and less expensive homes sold. This increase represents a 16% increase compared to Q1 of 2006 and almost an 8% increase from the last quarter of 2006.

Average days on market (DOM) in Bentonville has reached 162, up from 142 in Q4 of 2006 and 124 in Q1 of 2006. And the number of homes sold in Bentonville during Q1 of 2007 has decreased significantly to 151, compared to 192 in the same quarter last year and 197 in Q4 of 2006. The highest number of homes sold in the past couple of years in Bentonville occurred during Q3 of 2005, 292 homes.

The picture in Rogers is slightly different from that of Bentonville. It is the same in that fewer homes were sold in Q1 of 2007 compared to Q4 of 2006 (279 compared to 319), but when compared to Q1 of 2006 (275 homes sold), more homes were sold. Also both median and average prices have declined. The average sale price in Q1 of 2007 was $193,807 and the median sale price was $160,000. This represents a drop of 14% compared to Q4 of 2006 and 13% compared to Q1 of last year in average sale prices, and a drop of over 7% in median sale prices compared to Q1 and Q4 of 2006. As in Springdale, this signifies both falling home prices and the increased availability of less expensive homes. The DOM is up to 167 days, compared with 147 in Q4 of 2006 and 122 in Q1 a year ago.

Bella Vista’s market, in some respects, has remained somewhat steady in comparison to the other towns of NW Arkansas. This could be because the price ranges of homes are more limited. Nevertheless, there was also a decline in the number of homes sold in Q1 of 2007 compared to the previous quarter, from 243 to 200. The number of homes sold in Q1 of 2006 was 265. As in the other NW Arkansas towns, average DOM increased from 135 to 145, the highest it has been in the past couple of years.

But prices haven’t changed that much in Bella Vista. The average sales price did decline slightly from $178,789 in Q4 of 2006 to $176,201 in Q1 of 2007 (only 1.51%). The median price increased slightly in the same period from $155,000 to $159,000 (only 2.58%).

All in all, many of the changes are normal seasonal ones and follow similar patterns to previous years. As mentioned earlier, the weather does have a significant effect on the NW Arkansas housing market, and this winter has been extremely cold. Another factor has been the large amount of media type about the “housing slump” which made many buyers afraid to purchase; they didn’t want to pay too much if prices were going down.

Until the past couple of quarters, NW Arkansas seemed immune to these national trends with home prices rising even as they were bottoming out in other parts of the country, but an adjustment has finally occurred.

Yes, prices have come down, so this might be a good time to buy, since the supply of homes is up and interest rates are still down. It is definitely a buyer’s market in almost all price ranges. And now that the weather is improving, I have noticed a decided increase in buyer activity.

Note: Data for local statistics in this report is from the NW Arkansas MLS and included only homes that were listed by real estate agent members of the MLS. It does not include For Sale by Owners or other properties not listed by a real estate firm. For comparison purposes the national median home price in Q4 of 2006 was $219,300. NW Arkansas is still a “good deal.”

These figures do vary according to price range, city, and neighborhood. If you would like more information on your specific neighborhood, email me at judy@judyluna.com.

For more information on other economic indicators for Q1 2007:

http://www.realtor.org/Research.nsf/files/gdp.pdf/$FILE/gdp.pdf