May 04 2009
First time homebuyers skewing the numbers?
For yet another week, we’ve got list prices rising and inventories declining in four major markets in Arkansas.
That trend started to develop back in February and has carried through relatively consistently since then. The question, of course, is why does the average list price of homes continue to rise even as Arkansas housing markets are going through a readjustment period?
Such a situation seems out of sorts with the reality of the housing market — how is it that the average sales price of a home in Arkansas is about $140,000 while the average list price on May 4 was $231,237 in four of the state’s largest markets? Furthermore, why was there a sharp decline in housing inventory — the number of homes for sale — in those four major markets?
As for the heavy decline in inventory, that can be explained — in part — by the typical turnover we see at the first of every month. Listings tend to expire at the end of the month and some homeowners choose not to relist their homes. But, that’s not the only thing causing declines in inventories.
Realtors throughout Arkansas have confirmed that there are a lot of first time homeowners entering the market. The National Association of Realtors, in fact, claims that close to half of all people buying houses these days are first time homebuyers. That makes sense when you consider the incentives are certainly there for people buying homes for the first time — there’s the $8,000 tax credit for first time homebuyers through the IRS and mortgage rates that are at historic lows.
Here in Arkansas, some Realtors have said a problem they’re seeing has to do with a lack of homes in inventory at the lower price ranges (generally around $140,000 or less). When good homes are on the market at that price point, first time homebuyers tend to snap them up, leaving a high number of more expensive homes in inventory.
That high number of more expensive homes tends to drag the average list price up beyond the average selling price. Furthermore, a good number of homes in foreclosure have been bought by investors and first time homebuyers, thus driving the average list prices up a bit more.
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.
