Straight Shooting Real Estate

On June 8, combined average list prices in four major Arkansas markets dropped slightly while inventories — the number of homes for sale — increased slightly.

On June 8, there were 12,010 homes for sale in those four markets, up slightly from 11,905 single family, new and existing residences in the previous week. The average list price, meanwhile, was $232,342, down slightly from $232,823 in the previous week. The only market of the four surveyed where the average list price increased was the Jonesboro area.

Still, we’re seeing the trend that has been developing since the first of the year continue — average list prices are increasing while inventories have remained relatively flat over the past six months. Why? Realtors throughout Arkansas have observed that houses are moving quite well at the low and middle price ranges, thus keeping inventory in line.

More expensive homes — houses priced at around $200,000 and above in most areas — are moving slower, thus putting upward pressure on average list prices. It seems first time home buyers attracted by low interest rates and the $8,000 first time home buyer’s tax credit are turning out in droves and shopping for homes in the middle and lower price ranges.

Every week, the Arkansas Realtors Association collects and distributes the average and median list prices and the number of homes in inventory (homes for sale) for single family, new and existing houses in four markets. Those markets are Benton and Washington counties in Northwest Arkansas, the Fort Smith/Van Buren areas (Crawford and Sebastian counties) in west Arkansas, the Jonesboro area (Craighead County) in northeast Arkansas and the Little Rock-North Little Rock-Conway Metropolitan Statistical Area (Faulkner, Grant, Lonoke, Perry, Pulaski and Saline counties) in central Arkansas. While those four markets don’t tell the whole story, looking at them together gives us a pretty good idea about developing trends in markets throughout the state.

The April Housing Market report from the Arkansas Realtors Association is a mixed bag.

At first glance, at least.

In April, there were 2,059 single-family, new and existing homes sold by Realtors through reporting multiple listing services in Arkansas. That total is 8.04 percent lower than the 2.239 homes sold last year. Average sales prices were down 2.59 percent –$141,953 compared to $145,733 in the same month last year.

However, the April report was a substantial improvement over the one issued by March. The March report was better than the one for February, which was an improvement over the January report. Want proof? Click right here , download the housing market reports from the Arkansas Realtors Association issued this year and compare the numbers for yourself.

If you’d rather not do that, it’s easy to see what a substantial improvement the April report is just by taking a look at the year-to-date totals. As I mentioned, the 2,059 sales in April represents an 8.04 percent decline from a year ago. However, sales have dropped 18.17 percent when comparing the year-to-year totals, meaning the decline has slowed. The same is true of average sales prices. The 2.59 percent drop reported in April is better than the 4.95 percent drop in the average sales price reported for the first four months of the year (an average of $139,643 compared to $146,922 through April 2008).

In other words, we’re seeing the rate of decline slow and there is hope that we’ll eventually see the market making gains again. It’s worth mentioning that sales in Arkansas typically peak in the months of May through August and there’s no reason to believe this year will be different.

A good number of Realtors in this state are hoping the momentum gained during the summer months will carry through to the fall and winter. Should we see gains in September and October, then we can truly start talking about a recovery in the housing market. Whether or not things will play out that way is anyone’s guess, of course, as unknown factors like consumer confidence, continued government action and other items come into play. Will mortgage rates remain low and will the overall economy improve between now and September? We’ll just have to wait and see, won’t we?

There are times when observing the possible development of a slow, steady trend is enjoyable.

After going through a couple of years of getting used to an increasing amount of bad news coming out of the real estate industry, watching the steady growth in four major Arkansas housing markets and a decline in the number of homes for sale has been a pleasant change. In a classic, supply and demand model, that’s exactly what you want to see — a decreasing supply of an item (houses, in this case) responded to by an increase in list prices.

Of course, that’s only half the story. The graph at the top of this post looks pretty good, doesn’t it? It is a pleasing site, to be sure, but the inevitable question is why are list prices going up as the number of homes for sale is dropping? Yes, increased sales tell part of the story, but what the numbers don’t show very well is that downward pressure on inventory isn’t simply due to more sales.

No, there are some people who have made the decision not to sell their homes while they perceive the market as being down. Also, we’re seeing a lot of shoppers in the lower and middle price ranges, thus causing those homes to move quicker than they have in recent memory. Prices in the upper ranges — around $200,000 and above in most Arkansas markets — are still moving slowly.

That, of course, partially explains the increase in average list prices. The less expensive homes are coming out of inventory as they are bought by first time homeowners interested in the $8,000 tax credit, investors looking to buy real estate at attractive prices, people entering the market in pursuit of historic low interest rates, etc. Those more expensive homes, then, are putting some upward pressure on average list prices.

The good news here is that many Realtors hold to the notion that activity in the lower price ranges always comes first — it spreads to the higher price ranges in time, Realtors say. More activity in the lower ranges, then, is viewed by many as a harbinger of great things down the road. Hopefully, we’ll see that scenario play out again in the current market.

Here in Arkansas, we are seeing some signs of improvement in sales, to be sure. I’ll get into that in more detail tomorrow when I, on behalf of the Arkansas Realtors Association, release the April 2009 housing market report. Here’s a bit of a preview — it’s not an excellent report, but it does reveal that the consistent sales growth that was evident in February continued through April. That’s at least a reason to be optimistic, so stay tuned.

Every week, the Arkansas Realtors Association collects and distributes the average and median list prices and the number of homes in inventory (homes for sale) for single family, new and existing houses in four markets. Those markets are Benton and Washington counties in Northwest Arkansas, the Fort Smith/Van Buren areas (Crawford and Sebastian counties) in west Arkansas, the Jonesboro area (Craighead County) in northeast Arkansas and the Little Rock-North Little Rock-Conway Metropolitan Statistical Area (Faulkner, Grant, Lonoke, Perry, Pulaski and Saline counties) in central Arkansas. While those four markets don’t tell the whole story, looking at them together gives us a pretty good idea about developing trends in markets throughout the state.

Every now and again, the Arkansas Realtors Association (ARA) feels it necessary to remind homebuyers to get a home inspection prior to purchasing a house.

Why? A lot of disgruntled buyers would have been in much better shape had they gotten a home inspection. Most homes have a problem or two so it only makes sense to find out what those problems are prior to purchasing the home.

Buyers will often fall into the trap of waiving their right to a home inspection because they either don’t want to spend the $200 to $500 to get one or they worry about hurting someone’s feelings. Perhaps they’re buying a home from a friend or a family member and feel the seller will take offense if a home inspection is ordered.

While home inspections will certainly unveil any sneaky tactics shady sellers are employing to actively conceal defects, most sellers are simply unaware of problems in their homes. Ordering a home inspection, then, should not be viewed as a challenge to the credibility of the seller – even the most honest homeowners may have problems in their homes of which they are unaware.

As for the inspection fee, it is a small price to pay to defend against problems in the future. Let’s say, for example, there are foundation problems in a home that aren’t readily apparent. The seller might not know about the problems, but the buyer will certainly want to be aware of them prior to purchasing the home – foundation problems are expensive to fix, so why not spend a few hundred dollars on an inspection fee in order to avoid potentially thousands down the road?

All Realtors in Arkansas used contracts that give buyers the option of either requesting a home inspection or waiving their rights to one. The ARA tells its members to encourage buyers to get an inspection in hopes of saving them a lot of trouble down the road.

Of course, if an inspection reveals expensive problems in a home, then the buyer and seller will likely negotiate over how to deal with them. If there are too many problems, the buyer may simply choose to walk away from the home.
More often, the buyer and seller negotiate over repair costs and who will assume them. It’s not uncommon for sellers to agree to provide a few hundred dollars to pay to repair minor problems in the house as most inspections reveal but few troubles.

In general, that’s all a home inspection will reveal – a few minor problems that are easily repaired. However, they uncover major defects, too, and no one wants to commit to spending thousands on a home only to find they’ll have to shell out big bucks to repair the problems that were lurking under the surface.

House to House is a weekly column I write on behalf of the Arkansas Realtors Association . It is picked up by about 20 newspapers and publications in Arkansas.

A bit of a trend that we’ve seen this year continues to play out in Arkansas — average list prices on homes for sale are increasing while inventories continue to decline.

The question, of course, is why are list prices increasing while the average sales price in Arkansas continues to recover? Further, why are inventories (the number of homes for sale) declining?

According to Realtors throughout Arkansas, the answer has everything to do with foreclosures and first-time homebuyers. For one thing, the number of foreclosed properties on the market has dropped compared to last year as they are being purchased rapidly by investors as well as families and individuals looking for a good deal. Let’s not forget that building has slowed throughout Arkansas, meaning there are less new homes in inventory than there were a year ago.

With the number of foreclosures rapidly exiting the market and the number of new homes decreasing, it’s no wonder inventories have generally decreased throughout Arkansas. Also, there has been more activity in lower and middle price ranges as first time homeowners — attracted to the market by low interest rates and the first time homebuyers tax credit — are snapping up homes in those price ranges. Indeed, the National Association of Realtors tells us that almost half of all buyers are first timers and those people shop in the lower and middle price ranges.

With increased activity at the lower and middle price ranges, then, we’re seeing upward pressure on prices as there are plenty of homes in the upper ranges — around $200,000 and above in Arkansas. There are some exceptions to the rule, of course, but those generally involved flat growth in either list prices or inventory — on the whole, we’re seeing list prices rise and inventories fall.

Every week, the Arkansas Realtors Association collects and distributes the average and median list prices and the number of homes in inventory (homes for sale) for single family, new and existing houses in four markets. Those markets are Benton and Washington counties in Northwest Arkansas, the Fort Smith/Van Buren areas (Crawford and Sebastian counties) in west Arkansas, the Jonesboro area (Craighead County) in northeast Arkansas and the Little Rock-North Little Rock-Conway Metropolitan Statistical Area (Faulkner, Grant, Lonoke, Perry, Pulaski and Saline counties) in central Arkansas. While those four markets don’t tell the whole story, looking at them together gives us a pretty good idea about developing trends in markets throughout the state.

There was a time when wall-to-wall carpeting was the preferred luxury in homes.

Benton Realtor Denise Hyde said diversity is the best way to describe the flooring industry these days – people are looking for everything from carpet to hard surfaces such as stained concrete, hardwood floors and tile. In other words, carpet is still popular but it has competition.

“When it comes to comfort, they still want it. It hasn’t become obsolete,” Hyde said of carpet, adding that some people prefer hard surfaces. “I guess younger people tend to favor stained concrete, whereas hardwood floors and tile tend to appeal to everybody.”

She said hard surfaces are preferred by people worried about allergies and there seem to be a lot more of those people these days. Still, she said people focused on comfort and keeping down noise levels generally prefer carpet.

Hyde pointed out there was a time when it looked like carpeted bedrooms and hardwood floors throughout a home were going to be the norm. However, some other hard surfaces have gained in popularity over the past couple of years – stained concrete and tile.

What layout nets the most cash – hard flooring, carpeting or a combination of the two – on resale may be hard to determine as the value of flooring is subjective. Some good advice for people looking to remodel, then, might be to choose what they’re comfortable with and trust there will be buyers that will look favorably on those flooring choices when it’s time to sell the home.

Russ Halbert, owner of Premier Concrete Designs with offices in Benton and Fayetteville, is one of those people who have taken advantage of the increased popularity of stained concrete flooring over the past couple of years.

“I notice that a lot of people are getting on the allergy bandwagon now,” he said. “Also, a lot of people just want to know their alternative in remodeling – getting rid of what they have and getting something new.”

He said a lot can be done with stained concrete, ranging from single colors to complex, multilayered patterns that feature an array of colors and designs. Also, Halbert said it’s possible to have highly personalized designs such as school mascots, family crests and other custom details added to a stained concrete floor.

Of course, Halbert said too much customization may lead to something that will appeal to only a few people, thus cutting into the resale value of a home.

He pointed out that the use of stained concrete has evolved over the past few years to the point where intricate, polished surfaces are available for a reasonable price. To have a look at what Halbert’s company can do in the realm of stained concrete, visit his company’s portfolio by clicking right here .

Halbert said his company works throughout Arkansas and has been busy these past couple of years putting in stained concrete surfaces in both new and existing homes and businesses. His company has contracted to do both indoor and outdoor projects.

The housing industry, as a whole, has been moving toward more customization. It’s no surprise that a lot of companies have sprung up to meet individual tastes when it comes to flooring.

House to House is a weekly column I write on behalf of the Arkansas Realtors Association . It is picked up by about 20 newspapers and publications in Arkansas.

For the past couple of years, the term “short sale” has become more common among people discussing real estate.

A short sale occurs when a bank allows a homeowner who has fallen behind on a mortgage sell the home for less than is owed on the mortgage. A short sale, then, if often touted as a preferred alternative to a foreclosure.

There is a problem with short sales, however. Most mortgage companies will only accept a short sale if it has been approved by its loss mitigation department. If that department determines the bank will lose less money by accepting a short sale than it would if a home was taken through the foreclosure process, then the chances are good the bank will sign off on the deal.

While the number of people wanting to go the short sale route has increased, most banks have not increased the size of their loss mitigation departments. That only makes sense – when times are tough, you don’t see just a whole lot of businesses out hiring new employees.

So, here’s what can happen in a short sale. Let’s say Bank A is agreeable to seeing short sale offers presented to Seller B. Buyer C makes an offer on the home and forwards it to Seller B, who sends it along to Bank A for approval.

The loss mitigation department at Bank A is dealing with a stack of short sale offers and is a bit slow in getting around to the offer from Buyer C. After a time, Buyer C gets tired of waiting, withdraws his offer and sends Seller B back to the drawing board.

On May 14, the Barack Obama Administration announced the Foreclosure Alternatives Program which is designed, in part, to speed up the short sales process. For details on the program, visit www.treasury.gov.

The program is in effect through 2012 and includes standardized documents designed to minimize the complexity and increase use of the short sale option. Also, incentives are built in to encourage mortgage servicers to pursue the short sales route.

Also, mortgagers are encouraged to exercise the deed-in-lieu of foreclosure option if a property does not sell within the time allowed in the short sale agreement. A deed-in-lieu foreclosure is, simply, an arrangement through which the mortgage company takes the deed to the home and releases the borrower from the debt.

Over the past few months, we’ve seen the government take a variety of steps to help mitigate trouble in the housing market in the wake of the failure of the subprime mortgage market, the economic recession and a number of factors that have make it next to impossible for some homeowners to pay their mortgages. The Foreclosure Alternatives Program is another one of those measures the federal government has put in place and, hopefully, a good number of homeowners will find it to their advantage to use it.

House to House is a weekly column I write on behalf of the Arkansas Realtors Association . It is picked up by about 20 newspapers and publications in Arkansas.

The National Association of Realtors® (NAR) on May 4 issued a report stating that the pending homes sales index was up for March.

The NAR’s Pending Homes Sales Index is based on contracts signed in March and showed an increase of 1.1 percent over March 2008. The index is based on national pending sales and can be found on the Internet in the news releases section listed at www.realtor.org/press_room.

In Arkansas, the March sales figures were still drifting in to the offices of the Arkansas Realtors® Association so it’s impossible to say for sure whether that month was a booming one for Arkansas markets. However, there is enough anecdotal evidence out there to suggest that Realtors® in the Natural State are at least optimistic (editor’s note — the Arkansas March homes sales report is out now).

According to some Arkansas Realtors® and reports from the NAR, first time homebuyers are driving a lot of sales now. Specifically, almost half of all homes sold these days are to first time homebuyers, the NAR said.

What’s bringing them to the market? There are at least three things that are convincing people to purchase homes. First of all, there has been downward pressure on prices for over a year now. The latest finalized report for Arkansas is from February when the average sales price across the state was $141,349 – down 3.5 percent from $146,487 in February 2008.

Arkansas real estate agents have said that continued, downward pressure on prices has convinced some of the “fence sitters” that the current climate is a good one in which to purchase a home.

Second, there’s the $8,000 tax credit for first time homebuyers to consider. Generally, people who haven’t owned a primary residence in the past three years and individuals making less than $95,000 per year ($190,000 for couples) can take advantage of the tax credit. Eligible homebuyers purchasing a house from Jan. 1 through Nov. 30 can take advantage of the tax credit.

That credit, by the way, is in the form of a check from the government for 10 percent of the purchase price of the home or $8,000 – whichever amount is smaller – and does not have to be repaid.

Furthermore, mortgage rates are at historic lows, coming in at less than 5 percent on a 30-year, fixed rate mortgage. How much of a bargain is that rate? Low enough that banks have reported refinancing mortgages that were taken out a mere six months ago because people applying for them found they could save money in the long run in spite of closing costs.

Bear in mind that no one is claiming the market is back to normal and that we’ll see no more market corrections. However, there are more than a few Realtors out there who say that we know better days are ahead when we see more activity in the lower price ranges.

Those are the price points where first time homebuyers tend to shop and there has been a lot of activity among buyers looking at homes costing around $150,000 or less. For that reason, a number of Arkansas Realtors® are cautiously optimistic.

House to House is a weekly column I write on behalf of the Arkansas Realtors Association . It is picked up by about 20 newspapers and publications in Arkansas.

A look at average list prices and the number of homes for sale over the past year reveals a trend that’s worth noting — average list prices throughout Arkansas have increased over the past year as inventories have decreased.

The chart above tells the story and it really should come as no surprise — the time-honored law of supply and demand suggests that the average asking price of a house (or anything else) will increase when there are fewer homes on the market.

Some people, of course, might question whether inventories have declined because more people are buying homes or because people are choosing not to list their houses until they believe the market has improved. Truth be told, it doesn’t really matter as far as people in the real estate industry are concerned. People have been worried about high inventory levels for close to two years now, so any sign that the number of homes for sale is declining is encouraging.

It’s too early to start pointing to a trend, of course, but we’re certainly keeping an eye on inventories and average prices here at the Arkansas Realtors Association. Hopefully, we’ll see further declines in inventories around the state and more upward pressure on list prices.

As for how the average/median list prices and homes for sale fared this week, the chart below should explain it all.

Every week, the Arkansas Realtors Association collects and distributes the average and median list prices and the number of homes in inventory (homes for sale) for single family, new and existing houses in four markets. Those markets are Benton and Washington counties in Northwest Arkansas, the Fort Smith/Van Buren areas (Crawford and Sebastian counties) in west Arkansas, the Jonesboro area (Craighead County) in northeast Arkansas and the Little Rock-North Little Rock-Conway Metropolitan Statistical Area (Faulkner, Grant, Lonoke, Perry, Pulaski and Saline counties) in central Arkansas. While those four markets don’t tell the whole story, looking at them together gives us a pretty good idea about developing trends in markets throughout the state.

Congress, once again, is taking up legislation designed to prevent mortgage companies from steering homebuyers into loans they can’t afford.

Nationally, foreclosure rates have been alarmingly high and a number of groups are blaming mortgage companies who engaged in predatory lending by not being forthcoming about the terms of loans. It has been alleged more than a few times that a lot of people having trouble paying their mortgages didn’t know what they were getting into when they took out those loans – that some lenders disguised the terms of those mortgages in hopes of getting bonuses for convincing people to take them.

The Mortgage Reform and Anti-Predatory Lending Act of 2009, then, is an attempt to regulate the mortgage industry. The bill, if passed, would end bonuses for brokers who steer borrowers into higher-priced loans and would require lenders to confirm borrowers’ income.

Also, the bill would prohibit lenders from making new loans or refinancing loans that don’t offer tangible benefits to borrowers. Two years ago, the House of Representatives passed a bill to regulate the mortgage industry and curb predatory lending, but it died in a Senate committee.

It’s worth mentioning that a good number of lenders have put their own measures in place to cut down on the shaky loans that have been blamed for at least high foreclosure rates in some cases and a sluggish economy in others. Anyone wanting to take out a mortgage, for example, had better be willing to come up with a down payment.

Additionally, it’s an established fact that lenders are looking more closely at credit reports than they have in the past and most mortgages require a down payment. Lenders have data suggesting that someone willing to put 5 percent of the purchase price down on a mortgage is more likely to carry though on the obligations under that loan than someone who puts down no money.

Mike Milner, past president of the Mortgage Bankers Association of Arkansas, said the investors behind many loans are requiring lenders to pull credit reports and verbally verify employment and income immediately before a loan closes. He believes virtually all investors will require those extra checks before long as lenders are very interested in taking what steps they can to cut down on loan default and foreclosure rates.

That makes a lot of sense, of course, as lenders lose money when a home goes into foreclosure. Taking a few extra precautions before a loan closes reduces the risk to the lender.

The National Association of Realtors has come out in favor of some mortgage industry reform. Also, Congress is taking a look at new regulations and lenders appear to be taking steps to cut down on the trouble they’ve had due to the issuance of shaky mortgages.

Whether or not the government takes action, it seems very clear that lenders and members of the real estate industry are aware of the problems caused when borrowers take out loans and can’t pay for them. A lot of groups are working to fix those problems and a more stable mortgage industry will hopefully emerge as the result.