Jun 01 2009
The trend continues…
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.
