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Home Foreclosures in Arkansas

Last week, the data and analytics firm CoreLogic released home foreclosure data for December 2011.  The figures show that Arkansas homeowners continue to fare better than the national average.  The percent of homeowners who were more than 90 days late on their mortgage payments (including those in foreclosure) was 7.3% nationwide.  In Arkansas the comparable figure was 5.2%.  Among the 50 states, Arkansas was ranked #31 on this particular statistic.

Source: CoreLogic

Relatively speaking, Arkansas fared even better on foreclosure inventories.  Across the nation, 3.4% of all homes with a mortgage were classified as being at some stage of the foreclosure process in December.  In Arkansas, only 1.4% of all homes with mortgages fell into this category.  Only 6 states had a lower inventory rate.

Compared to a year earlier, Arkansas’ foreclosure inventory was down 0.4%.  This was twice the size of the decline registered for the nation.

The CoreLogic press release quoted chief economist Mark Fleming as noting “the inventory of foreclosed properties has begun to shrink, and the pace at which properties are entering foreclosure is slowing.”  This is clearly good news, and Arkansas continues to fare better than many other parts of the country.

Arkansas Home Sales in 2011

The final sales report of the year from the Arkansas Realtors® Association (ARA) showed that home sales in December were down 6.2% from December 2010.  Total sales for the year were reported to be down slightly from the previous year (-0.6%), marking 2011 as the slowest sales year in recent history.  Nevertheless, there is reason to be optimistic about residential real estate markets in Arkansas.  Although 2011 sales were lower than the previous two years, they had been boosted in 2009 and 2010 by the Federal home-buyer’s tax-credit programs.  As shown in the figure below, home sales exhibited unusual spikes in the final months of the first-time home buyer’s program (November 2009) and at the conclusion of the second round of home-buyer tax credits (April 2010).  Sales in 2011 followed a more typical seasonal pattern, without any temporary boosts from government incentive programs.

Source: Arkansas Realtors® Association

After using standard statistical techniques to seasonally adjust the data, the extraordinary nature of the policy-induced sales spikes becomes even more apparent.  More important, the seasonally-adjusted data show a trend of increasing sales over the course of 2011.  Extrapolating this trend forward into 2012 suggests the emergence of a long-awaited, sustainable recovery in Arkansas residential real estate markets.

Source: Arkansas Realtors® Association; Seasonally adjusted by the Institute for Economic Advancement

At the UALR Economic Forecast Conference in November, we anticipated that annual home sales for 2011 would be down slightly from the previous year (-0.8%), but that we would see a significant improvement in 2012 (+12.6%).  Although this would represent a significant improvement, the forecast is not based on expectations of a dramatic recovery in housing market conditions; rather, it reflects the expected outcome of slow steady growth starting from a very low base.  Given the typical seasonal pattern in home sales, however, it won’t be until the summer surge that we will have a clear indication of how the totals will end up in 2012.

 

Arkansas House Prices – 2011:Q3

New data from the Federal Housing Finance Agency (FHFA) show that house prices in Arkansas increased slightly in the third quarter,  and data for the second quarter were revised to show a modest increase as well.   The FHFA All-Transaction Index for Arkansas increased by 0.4% from the second quarter to the third, leaving home prices down 1.8% from a year earlier.  The index for the U.S. was up 0.9% for the quarter, but remains 4.3% lower than the previous year.

Source:  Federal Housing Finance Agency
Source: Federal Housing Finance Agency

Among Metropolitan Statistical Areas (MSAs) that include parts of Arkansas, prices were up in Fayetteville-Springdale-Rogers, Fort Smith, Jonesboro, Little Rock-N. Little Rock-Conway, and Memphis.  Prices were down in Hot Springs, Pine Bluff and Texarkana.  Compared to the third quarter of 2010, prices were higher in two of the state’s MSAs:  Hot Springs and Texarkana. 

House prices in Arkansas have generally been trending downward from the beginning of 2009, and the increase in prices in the third quarter only partly reversed the accumulated declines.  Compared to two years ago, house prices are down in all of Arkansas’ MSAs.  But in the longer run, house prices outside of Northwest Arkansas have retained much of their value.  Over the past 5 years, the net change in house prices has been positive in 5 of the state’s MSAs, and are essentially unchanged in Pine Bluff.  Only the Fayetteville and Memphis metro areas have shown net declines since the third quarter of 2006.

Source:  Federal Housing Finance Agency
Source: Federal Housing Finance Agency

Arkansas Home Sales

The Arkansas Realtors® Association (ARA) announced this morning that home sales in September were up approximately 10.3 percent from a year earlier.  In recent months, we’ve seen substantial year-over-year increases in home sales.  In part, this is attributable to the fact that sales in the second half of 2010 were exceptionally weak.  Following the expiration of the Federal home-buyer’s tax credit programs in April 2010, the housing market experienced something of a “hangover” effect with monthly sales figures dropping to record lows.  Nevertheless, increases in home sales over the past three months suggest that the market is slowly improving.

In their press release, the ARA pointed out that “for the quarter (July – September), home sales increased 16 percent.”  As shown in the chart below, this comparison with the previous year partly reflects the low level of home sales in 2010Q3.  Yet the quarterly tracking of sales since then (after seasonal adjustment) reveals an ongoing upward trend.  As we move further beyond the post-tax-credit hangover, ongong strength in housing sales is to be expected.

Source:  Arkansas Realtors® Association; Seasonal adjustment by the Institute for Economic Advancement.
Source: Arkansas Realtors® Association; Seasonal adjustment by the Institute for Economic Advancement.

August Home Sales

The Arkansas Realtors® Association reported this morning that home sales in August were up nearly 20% from the previous year, with total sales of 2,401 residential units.  The strength of the year-over-year growth in home sales is partly attributable to the expiration of home-buyer’s tax credits in April 2010.  A post-tax-credit  hangover last year suppressed sales over the summer months — usually the peak season for home sales.  As a result, the more normal seasonal pattern of home sales this year looks particularly strong compared to the summer of 2010.

Nevertheless, the August sales totals represent an improvement over previous months.  Last month, we reported that July sales “were well-below the level that one would expect during the busy summer months.”  The August figures are an improvement over July, indicating that the summer peak occured in August this year (as it often does).  The strength of the August data are important for projecting annual sales totals:  August sales typically account for nearly 10% of annual home sales in Arkansas, and the July-August total often accounts for as much as 20% of annual sales.  

The chart below shows the patterns of home sales from 2007-2011, both seasonally-adjusted and not-seasonally-adjusted.  The projections shown in the chart are based on an assumption that home sales in September through December will be as strong as indicated in the report for August.  Given typical seasonal patterns, this implies home sales of around 2000 per month in September and October, and nearly 1700 per month in November and December (not seasonally adjusted).  If this strength prevails, the sales total for the year will be about equal to last year’s total.   Under this scenario, therefore, there is about a 50/50 chance that 2011 sales will show an overall improvement over the previous year.   

Source:  Arkansas Realtors® Association
Source: Arkansas Realtors® Association

How likely is this optimistic projected scenario?  Much depends on interpreting the sales peaks associated with the home-buyers tax credits in 2009 and 2010.  Total sales during these surges include three types of home-buyers:

  • Those who would have purchased a home anyway,
  • Those who purchased a home only because of the value of the tax credit, and
  • Those who purchased a home sooner, rather than later.

The key question pertains to the third group:  How much sooner were households induced to move their home purchases because of the tax credit?  Assuming that a substantial share of these home buyers advanced their purchase plans by months, rather than years,  the market should be returning to more normal patterns in the latter months of 2011.  The strength of the August sales report might therefore be taken as a sign that we are in this more-typical market already. 

On the other hand [and there’s always another hand when it comes to economic projections], recent signs of weakness in the general economy and a deterioration of consumer confidence might undermine the pace of home sales in coming months.

July Home Sales

The Arkansas Realtors® Association reported this morning that Arkansas home sales in July were 20% higher than a year earlier (see the full report here).  Taken in isolation, this statistic suggests considerable improvement in the Arkansas real estate market.  However, a broader look at home sales over the past several months shows that the July data confirm a trend of rather weak home sales during 2011.

As shown in the figure below, home sales tend to reach a seasonal peak during the summer months of June, July and August.  In 2010, however, sales spiked in April due to the expiration of the Federal home-buyers’ tax credit program.  Sales dropped sharply in the following months, with July 2010 showing a sales pace considerably lower than the summer months of previous years.  Sales in July 2011 were clearly higher than they were last summer, but were well-below the level that one would expect during the busy summer months.

Source:   Arkansas Realtors® Association
Source: Arkansas Realtors® Association

The weakness in home sales during 2011 is illustrated more clearly in the following figure, which shows seasonally adjusted sales data.  After adjusting for the typical pattern of low sales during the winter months and high sales during the summer, the non-seasonal cyclical pattern is more apparent.  So for in 2011, seasonally-adjusted home sales are above the post-tax-credit lull last year, but are not much higher than the during the recessionary period in 2008. 

Source:  Arkansas Realtors® Association; Seasonally adjusted by the Institute for Economic Advancement.
Source: Arkansas Realtors® Association; Seasonally adjusted by the Institute for Economic Advancement.

Today’s report from the ARA included cumulative sales statistics that  reinforce the weakness of 2011 sales:  For the year-to-date (January-July), sales in 2011 are down 7.7% from the same period in 2010.  Thus far, the statistics suggest that sales for the year are likely to be lower than in any of the previous five years.  

Nevertheless, there is still the possibility of a recovery in coming months.  The home buyers’ tax credit programs sapped some of the strength from 2011 sales by shifting demand forward into 2010.  It is likely that at least some of that demand shift is continuing to depress the pace of current sales.  The more time passes, the more the lagged effects of tax credit programs will wane, revealing the true underlying condition of the Arkansas real estate market.

Arkansas Home Prices Continue to Decline … On Average

New data from the Federal Housing Finance Agency (FHFA) show that house prices in Arkansas continued to decline in the second quarter of 2011.   The FHFA All-Transaction Index for Arkansas declined slightly (-0.2%) from the first quarter, leaving the index down 2.5% from the second quarter of 2010.  The rate of decline in Arkansas home prices remains below the national average:  the national statistics show prices down 1.9% in the second quarter and 4.5% lower than a year earlier.

Home price declines are far from uniform across the state.  As shown in the chart below, prices in the Fayetteville metro area have followed a pattern similar to the national average, while prices in Little Rock have only recently shown modest declines.

Source:  Federal Housing Finance Agency
Source: Federal Housing Finance Agency

In fact, house prices in some of the state’s smaller metro areas have fared even better than in the Little Rock area.  In the second quarter of 2011, prices rose in Hot Springs, Pine Bluff and Texarkana.  In each of these metro areas, prices are higher than they were a year earlier.  In Texarkana, house prices are higher than they were in the last quarter of the recession (2009Q2),  although prices in each of the other metro areas have fallen since then.  If we consider changes over the past five years, home prices in the Fayetteville and Memphis areas are down sharply, but homes in the state’s other metro areas have maintained their longer-run values.

Source:  Federal Housing Finance Agency
Source: Federal Housing Finance Agency

Arkansas Home Sales – 2011:Q2

The National Association of Realtors® (NAR) released statistics on home sales by state yesterday.  The seasonally-adjusted data for Arkansas show second quarter sales unchanged from the first quarter and down 17.6%% from the second quarter of 2010.  Nationwide, home sales were down 5.4% from the quarter and down 12.7% from the previous year.  The year-ago comparisons are not surprising:  the second round of home-buyer tax credits expired in 2010:Q2, generating a surge in sales. 

The NAR data are consistent with previously released reports from the Arkansas Realtors® Association (ARA).  The ARA data have shown home sales rising through the first half of the year, but this is a typical seasonal pattern.  As shown in the chart below, seasonally adjusted data reveal fairly stagnant home sales — well below the level of the previous year.

Source:  Arkansas Realtors® Association; Seasonally adjusted by the Institute for Economic Advancment
Source: Arkansas Realtors® Association; Seasonally adjusted by the Institute for Economic Advancment

In fact, the NAR data and the ARA data — while based on different samples and methodologies — are showing a very similar pattern when placed on a comparable basis.  In the chart below, the ARA data is averaged by quarter and both series are indexed to equal 100 in the first quarter of 2009.  Prominent peaks in 2009:Q4 and 2010:Q2 mark the surges associated with tax-credit dates.  Both sets of data show a sharp drop-off in 2010:Q3, and slow sales since then.

Sources:  National Association of Realtors®, Arkansas Realtors® Association, Institute for Economic Advancement
Sources: National Association of Realtors®, Arkansas Realtors® Association, Institute for Economic Advancement

Arkansas House Prices – 2011:Q1

The latest house price data from the Federal Housing Finance Agency (FHFA) shows that average house prices in Arkansas continued to decline in the first quarter of 2011.  The FHFA “All Transactions Indexes,” which incorporate house price information from both home sales and refinancings, showed an average decline for Arkansas of 1.6% in the first quarter of the year.  Over the last four quarters, the average value has fallen about 1.9%.  These decreases are smaller than the national average:  In the first quarter, average prices for the U.S. as a whole fell 2.7%, and are down 3.1% over the past  four quarters.

Source:  Federal Housing Finance Agency
Source: Federal Housing Finance Agency

The statewide average conceals some stark differences among regions of the state.  As shown in the figure below, house prices in the Fayetteville-Springdale-Rogers metro area have followed a pattern very close to the U.S. average.  Over the past four quarters, prices in Fayetteville are down 4%, and have fallen by 14% over the past five years.  In contrast, house prices in central Arkansas are down only 1.1% compared to a year earlier, and are about 4% higher than five years ago.

Source:  Federal Housing Finance Agency
Source: Federal Housing Finance Agency

The state’s smaller metro areas have generally fared better than the statewide average as well.  In the first quarter, prices increased in Texarkana and Jonesboro. Both of these metro areas have generally seen modest but steady price increases throughout the “boom and bust” cycle experienced in most parts of the country.   House prices in Hot Springs and Pine Bluff had been rising steadily during the early stages of the housing downturn, but have turned sharply negative in recent quarters.  Prices in Fort Smith have also fallen over the past two years, but not as dramatically as in Hot Springs and Pine Bluff.

Source:  Federal Housing Finance Agency
Source: Federal Housing Finance Agency

A longer-term perspective reveals the stark differences among Arkansas metro areas.  House prices in five of the state’s metro areas are higher than they were at the beginning of 2006.  Recent declines in Pine Bluff have lowered prices to about the same level as in 2006, while prices in northwest Arkansas are down by 14%–more than the national average decline of 11.8%. 

It should be noted that even the relatively large price declines in the Fayetteville-Springdale-Rogers metro area pale in comparison to some of the more severly impacted regions of the country.  Over the five year period from 2006:Q1 to 2011:Q1, house prices in California are down by nearly 35%, price declines in Florida and Arizona are close to 40%, and house prices in Nevada have fallen by nearly half: -48.9%.

Arkansas Home Sales — 2011:Q1

The latest monthly home sales figures from the Arkansas Realtors® Association (ARA) have appeared to be rather volatile.  Compared to the previous year, sales were up 13% in January, down 6% in February, then down 15% in March.   These swings prompted Amy Glover Bryant, Director of Communications for the ARA, to characterize the market as “something of a roller coaster ride.”  Interpreting the data are complicated  by seasonal patterns and the delayed effects of the home-buyer tax credits in 2009 and 2010.

Home sales follow a recurring seaonal pattern, with sales strong during the summer months and slow during the winter.  Consequently, month-to-month comparisons of raw sales data are dominated by seasonal effects, with little information about business cycle fluctuations or longer term trends.  The appropriate measure for tracking such data is the year-over-year comparison that has recently yeilded such variable readings.   To properly interpret year-over-year data, however, it is necessary to keep track of special factors that were influencing the market 12 months ago.  For several months now, the Federal government’s home-buyer tax credit programs have been relevant for that evaluation.

As shown in the figure below, year-to-year changes for January, February and March of 2011 are guaged against sales figure for 2010 that lie between the tax-credit expiration dates of November 2009 and April 2010.  January is typically the slowest sales month of the year, and last year it was also effected by the slowdown that immediately followed the November 2009 tax credit expiration.  Sales began to pick up in February and March as the second tax-credit program ramped up toward a peak in April.  These developments have effected year-over-year comparisons just as much (if not more than) the sales figures for 2011. 

Source:  Arkansas Realtors® Association
Source: Arkansas Realtors® Association

Another way to disentangle the seasonal fluctuations from underlying cycles and trends is to use statistical methods to “seasonally adjust” the data.  The transformed, seasonally-adjusted data provide an estimate of the sales pace for each month under the counterfactual assumption that home sales are distributed evenly throughout the year.   After the purely seasonal components are removed, it is legitimate to make month-to-month comparisons, or to compare different points throughout the year.  The figure below shows the Arkansas home sales data, after seasonal adjustment. 

Source:  Arkansas Realtors® Association.  (Seasonally adjusted by the Institute for Economic Advancement.)
Source: Arkansas Realtors® Association. (Seasonally adjusted by the Institute for Economic Advancement.)

After seasonal adjustment, the two sales peaks associated with the end-dates of the home-buyers’ tax credits are clear.  Each peak is followed by a sharp drop in sales.  Since the expiration of the second program last year, sales languished — but have begun to recover, slowly.

In addition to the monthly data from the ARA, the National Association of Realtors® (NAR) publishes quarterly, seasonally-adjusted sales figures for each state.  The methodologies for collecting and processing the data differ between these two sources, so it is interesting to compare their implications.  The figure below presents such a comparison, with each series normalized to equal 100 at the start of 2009.  Both series show the sales peaks associated with the home buyers’ tax credits, and both indicate a slow, uneven recovery since the drop-off in 2010:Q3.  The NAR data show a slight increase in 2011:Q1 compared to the previous quarter, while the ARA data show a slight decrease. 

 

Sources:  National Association of Realtors®, Arkansas Realtors® Association, Institute for Economic Advancement.
Sources: National Association of Realtors®, Arkansas Realtors® Association, Institute for Economic Advancement.

The trends are not clear enough to make any unambiguous projections.   But when it comes to the monthly data releases from the ARA, April 2011 is almost certain to  represent a sharp decline from the previous year.  Similarly, July 2011 (typically the highest sales month of the year) is almost certain to be higher than July 2010.  When those figures are released, however, it will say more about what happened in 2010 than what is happening today.