Straight Shooting Real Estate

I’ve long since given up trying to figure out what’s going to happen next in the housing market.

If you have a crystal ball and can reckon it all out, let me know and we’ll both get rich.

The past few average/median list prices and inventories reports I’ve put together for the Arkansas Realtors Association have been confusing, to say the least. Why? You’d expect that list prices would be falling on average in light of the fact we’re in the middle of a housing market readjustment period, but that’s not happening.

The report I sent out today covers new and existing, single family residences markets 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.

The question, of course, is why are average list prices increasing when you’d expect the opposite to be true? Further, why are inventories declining? I asked a few Realtors about this and there are a number of factors that could be contributing to the reports we’ve been seeing over the past few weeks.

First of all, there’s the foreclosure market to consider. Back when the market was booming from 1999 through 2006, everyone and his dog started building houses. A lot of those builders, as we’ve learned, went bankrupt, thus dumping a bunch of new homes on the market.

Banks, in a hurry to get rid of those things (because they’re not in the business of listing real estate) , sold them off at very attractive prices. People who owned homes, then, found themselves in competition with those homes and the downward pressure on home prices was immense.

Seemingly, a lot of those homes are off the market now and few new ones are being built. So, that downward pressure on prices has eased up a bit and homeowners are facing less competition from new homes that are in the foreclosure market. Sure, there are still some foreclosures to consider, but Realtors who focus on those tell me that they’re not as busy as they were last year. There are still plenty of foreclosed homes to go around, of course, but one Realtor described their arrival on the market as a “steady stream” rather than as the “flood” that hit areas around the state last year. Fair enough.

Second, I’m told there is more interest among potential buyers right now due to three things — the $8,000 tax credit for first-time homeowners,  mortgage rates that are at historic lows (I’ve heard of 30-year, fixed rate mortgages available for around 4.85 percent interest) and attractive prices. Apparently, those factors have gotten the attention of potential sellers, too, thus causing them to both put their homes on the market and list them in at least the middle range of what the fair market values for their homes are.

While we haven’t seen sales improve dramatically (although the Arkansas February housing market report was the most encouraging one to come along in a few months),  it is encouraging to hear of potential buyers at least taking a look at purchasing homes. Will that interest translate into more homes sales? We’ll just have to wait and see.

One more thing — the average list price of the areas surveyed is $228,957. Does that mean your average house in Arkansas will cost that much? No. The average sales price generally ranges between $140,000 and $150,000 these days. The list prices in the inventories report tends to be higher because it is skewed by the number of higher-priced homes that are on the market. That segment has been moving considerably slower than others, so the more higher priced homes you have, the more inflated the average price appears.

As they used to say on that way cool G.I. Joe cartoon, “So, now you know — and knowing is half the battle.”

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