Sales Decline in Arkansas; Experts Confident of Turnaround

Arkansas home sales have dropped more than 22 percent in September compared with September 2005, the Arkansas Democrat-Gazette reported Thursday.

It was the seventh straight month that home sales have declined in the Natural State compared with last year, the Arkansas Realtors Association said, although the 22 percent drop-off is the biggest one-month fall this year. In the state’s five largest markets, declines ranging from 13-39 percent were reported.

• The average home sale price in Arkansas during September was the lowest since June, although it was 4.5 percent higher than in September 2005.
• For the first nine months of the year, however, Arkansas home sales are down only 1.74 percent compared with the same period last year.
• Sales were strong in February and then tailed off as the state joined a nationwide trend of slowing housing markets.

The state figures are based on 30 Arkansas markets that report sales to the association and don’t include homes sold by owners without a Realtor.

There were almost 40 percent fewer homes sold last month compared with a year earlier in Benton County, the second-largest housing market in the state. The state’s largest market, Pulaski County, reported 13 percent fewer homes sold in September than in the same month a year ago.

The decline is due to mortgage rates, which are a little higher than the past few years, and a general sense of uneasiness when it comes to the real estate market. Many buyers, in Arkansas and beyond, are in more of a wait-and-see mode than in years past.

Analysts say that publicity about a potential housing bubble and the possibility that it will burst may be a contributing factor to the current slowdown. Until this year, Arkansas real estate generally had become more expensive since the start of the decade — though the increases were small compared to areas such as the California housing market.

“It’s all about consumer confidence. In this case, the media certainly exacerbates the issue, but the same thing was true [when sales were soaring]. There is a psychology to investing. When it is good, everybody is on the bandwagon. But when it starts to turn, a downward trend can be exacerbated by the [publicity],” said Kathy Deck, associate director of the Center for Business and Economic Research at the University of Arkansas.

Deck pointed out that home sales this year are being compared with the two best years for home sales in history. More homes were sold nationally last year than in any year before, breaking a record set in 2004.

Sales of new homes and housing starts were up almost 6 percent nationally in August, the Commerce Department said this week. But for the year, new residential construction still is off 18 percent compared with the same period last year, according to the Commerce Department.

• The Arkansas Realtors’ report showed average home sale prices in Arkansas in September of $151,773, up 4.5 percent from $145,185 in September 2005.
• But the average in September is down 4.4 percent from $158,709 in August and lower than any monthly average since June.

Many aren’t worried, however. The Arkansas housing market is known for being less volatile than many large metropolitan markets nationally.

Randy Alexander, owner of McKay and Co. in Little Rock, said there is a slowdown due to increased mortgage loan cost and run-up in inventory, but doesn’t think there is a crisis in the Arkansas housing market.

“I think what is happening is that we’re probably taking a breather. The market still seems to have momentum in it, although it is not at the same pace of a few months ago,” Alexander said. “From a buyer’s perspective, mortgage rates are still low, and there is certainly plenty of inventory.”