The latest data from the Federal Housing Finance Agency (FHFA) shows a continuing upward trend in Arkansas house prices, albeit at a slower rate than the U.S. average. The FHFA’s “Expanded Data Indexes” showed that Arkansas house prices rose 0.5% in the third quarter compared to an increase of 2.2% nationwide (seasonally adjusted).ⁱ Over the past year, house prices were up 2.6% in Arkansas and up 8.8% for the entire U.S.
Source: Federal Housing Finance Agency; seasonal adjustment by the Institute for Economic Advancement
According to the “All-Transactions Index,” which includes home purchases and refinancings through FannyMae or FreddieMac, Arkansas house prices were down slightly for the quarter (-0.3%), but still up 2.2% over the past year.ⁱ Among the state’s metropolitan areas, prices were down everywhere except Jonesboro and Little Rock. But even after a 1.1% decline in third quarter, prices in the Fayetteville-Springdale-Rogers metro area were 3.2% higher than a year earlier.
Source: Federal Housing Finance Agency
As illustrated in the figure below, the longer-term trends in house prices differ considerably among metropolitan areas. The two-year growth rate of 3.6% in Northwest Arkansas represents a sharp reversal of the declining trend in 2007-2011. On the other hand, the two-year growth rates of 5.6% in Jonesboro and 2.4% in Texarkana represent continued rising prices. In fact, the nationwide collapse of housing prices preceding and coinciding with the recession was evident only in Fayetteville and Memphis (with a delayed downturn in Hot Springs). Compared to the first quarter of 2007, house prices are higher in Texarkana, Jonesboro, Fort Smith, Little Rock, and Pine Bluff.
Source: Federal Housing Finance Agency
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ⁱ The Expanded Data Indexes include home purchases financed through FannieMae and FreddieMac, plus additional data from county recorders’ offices and from DataQuick. The All-Transactions Indexes include both home purchases and refinancings through Fanny and Freddie, but without the additional data that are included in the Expanded Data Indexes.
New data from the Federal Housing Finance Agency (FHFA) showed that home prices continue to rise, although the rate of increase in Arkansas remains below the national average. Among the various indexes published by the FHFA, the most informative is the “Expanded-Data Index,” which incorporates data from FannieMae, FreddieMac, FHFA as well as county records. By this measure, Arkansas house prices in the second quarter were unchanged from the previous quarter, but were up 2.7% from a year ago. Nationwide, the Expanded-Data Index showed prices up 2.4% from the previous quarter and up 7.5% from 2012:Q2. As shown in the chart below, it is not surprising that Arkansas house price appreciation is slower than the national average: During the nationwide home price crash, declines in Arkansas were far smaller than for the U.S. as a whole. Compared to the peak of home prices in early 2007, prices in Arkansas are down 5.6% while the nationwide average is down 17.6%.
Source: Federal Housing Finance Agency
Data for Arkansas’ metro areas showed that the upward momentum in house prices is widespread. According the FHFA “All-Transactions Indexes” (which include sales and refinancings), prices were flat in the Little Rock metro area but were up in all other parts of the state. Over the past year, the largest price increases have been in the Fayetteville-Springdale-Rogers MSA — which had also experienced the largest decline from 2007-2010. Prices have also been rising at a brisk pace in Texarkana, Hot Springs, and Jonesboro. Over the past 5 years, prices have increased in Jonesboro and Texarkana, and have held steady in Fort Smith.
Source: Federal Housing Finance Agency; Seasonal adjustment by the Institute for Economic Advancement
The MSA house price data are broadly consistent with the CoreLogic® data that we discussed in a recent post. Specifically, the CoreLogic data suggested that price increases in Fayetteville and Texarkana were particularly robust after excluding “distressed sales.” The FHFA data are based on mortgages that are processed through FannyMae and FreddieMac, and are likely to under-sample distressed sales. The CoreLogic data also suggested that recent house price appreciation has been relatively slow in Fort Smith and Hot Springs.
The chart below illustrated the longer-run perspective, comparing FHFA house prices indexes for Arkansas’ MSAs from a common starting point: 2007:Q1. Over that 6-1/2 year time span, prices have increased in all of the state’s metro areas except for Hot Springs, Memphis, and Fayetteville. Prices in Northwest Arkansas suffered the state’s largest declines during the house price collapse — down almost 20% in early 2011. But since that low-point, prices in the Fayetteville MSA have been showing significant recovery. In Texarkana, the net change in house prices since 2007:Q1 has been an increase of over 10%.
Source: Federal Housing Finance Agency; Seasonal adjustment by the Institute for Economic Advancement
Some new information on Arkansas home prices was released earlier this week by CoreLogic®, a data and analytics company. For the nation as a whole, the report showed an increase of 11.9% from June 2012 to June 2013. The home price index for Arkansas showed an increase of 2.2% over the same period.
The CoreLogic data also report changes in home prices after excluding so-called “distressed” sales — which include properties that have been through foreclosure and those that are exchanged in “short-sales” (in lieu of foreclosure) . After removing these homes from the sample, the rate of price appreciation nationwide was 11% year-over-year — little different from the full sample that includes distressed sales. For Arkansas, home prices excluding distressed sales were up 3.6%. The higher rate of appreciation for non-distressed sales in Arkansas suggests that foreclosures and delinquencies continue to hold down the overall rate of home price increase in the state.
The CoreLogic data also cover prices for individual metropolitan areas. As shown in the table below, rates of home price appreciation (and depreciation) vary across the state. For the 12 months ended June 2013, the highest rate of appreciation was in Jonesboro — up 6.4%. Excluding distressed sales, the Jonesboro increase was 6.1%, indicating that the impact of distressed sales in the Jonesboro market is small and/or dissipating. In contrast, prices declined by 1.2% in Texarkana, but were up by nearly 10% after excluding distressed sales from the data.
Source: CoreLogic
The data from CoreLogic track prices using a repeat-sales methodology, similar to that used by the national S&P/Case-Shiller index and the FHFA data that are routinely tracked here on the Arkansas Economist. Although accessibility of the CoreLogic data is not as extensive as the FHFA data, the CoreLogic data provide up-to-date snapshots of home price appreciation and are unique in their attention to the effects of distressed sales on overall home prices. FHFA data on home prices in the second quarter of 2013 will be released on August 22. It will be interesting to see how those data compare to the information from the CoreLogic indices.
The Commerce Department reported yesterday that the median sales price of new houses sold in April was up 13.1% from a year earlier. Separately, new data from the Federal Housing Finance Agency (FHFA) confirmed that home values are on the rise, both nationally and here in Arkansas. As shown in the figure below, house prices continued their upward trajectory in the first quarter of 2013, rising 1.9% for the U.S. and 1.7% for Arkansas. Compared to the first quarter of 2012, prices were up 6.4% nationally and 5.5% in Arkansas.
Source: Federal Housing Finance Agency
A Note on Methodology: The “Expanded-Data Indexes” shown in the figure use data from all mortgages purchased or securitized by FannieMae and FreddieMac, augmented with data from local property assessors’ offices. The FHFA measures are constructed as weighted, repeat-sales indexes (like the Case-Shiller Index). This methodology is intended to estimate underlying trends in house values more accurately than simple measures such as median or average sales prices.
When it comes to measuring house prices for metropolitan areas, the FHFA publishes measures known as “All-Transactions Indexes,” which include information from actual home sales as well as home refinancings. The published metro area data are not seasonally adjusted. Theoretically, there should be no seasonal pattern to house prices: As long-term durable assets, home values should not be affected by transitory and predictable short run variations. However, measures of average or median prices often do display seasonal variation. The explanation is that the mix of home sales varies seasonally, so that average house-price measures show increases during seasons when higher-value homes comprise a relatively larger share of total sales. Although the weighted, repeat-sales methodology used by the FHFA is intended to control for these short-run fluctuations, it is quite possible for this seasonal effect to have in impact — particularly when there are relatively few underlying data observations.
With this possibility in mind, we tested for seasonality in the data for Arkansas’ Metropolitan Statistical Areas (MSAs). Statistical tests rejected the presence of any stable seasonality, but did reveal evidence of small, time-varying seasonal fluctuations. This was especially true for recent data, particularly during the period of relatively low sales volumes since the housing crash. This is exactly the situation in which compositional variation might be expected to show through to the repeat-sales indexes. Consequently, the MSA data presented below have been seasonally adjusted (using the standard Census X-12 ARIMA procedure) to provide a clearer view of underlying trends in Arkansas house prices.
Metro Area Data: Seasonally adjusted measures of the FHFA all-transactions indexes show rising home prices in most, but not all of the state’s metro areas. Quarterly growth rates were positive for all metro areas except Pine Bluff and Texarkana. Both of these MSAs have experience cumulative price declines over the past two years; however, Texarkana house prices remain 3.8% above their level of five years ago.
Northwest Arkansas experienced that largest cumulative decline since the downturn in housing prices, but prices have been recovering, rising by more than 2-1/2% over the past two years. Prices have also been generally rising over the past two years in Fort Smith, Hot Springs, Jonesboro, and Little Rock. House prices in the Memphis MSA have been fairly flat, and remain 12.4% below their levels of five years ago.
Source: Federal Housing Finance Agency; seasonal adjustment by the Institute for Economic Advancement Source: Federal Housing Finance Agency; seasonal adjustment by the Institute for Economic Advancement
The recovery of house prices is a positive development for two related reasons: First, the price increases suggest a long-awaited pick-up in demand. The recovery of home values, in turn, is likely to spur additional sales activity: discretionary buyers should be more willing to enter the market now that the underlying value of their potential investment is no longer depreciating. Indeed, although it is still early in the sales year, home sales in 2013 appear to have gotten off to a good start.
More evidence came out today suggesting that home prices have bottomed-out and are moving tentatively higher. The new data from the Federal Housing Finance Agency (FHFA) — covering the fourth quarter of 2012 — show upward momentum in prices both nationwide and here in Arkansas. As shown in the chart below, the FHFA “Purchase-Only Index” for Arkansas held relatively steady over the second half of the year, but ended the year about 2.3% higher than the fourth quarter of 2011. The corresponding measure for the U.S. continues to increase steadily, rising 5.5% over the course of 2012.
Source: Federal Housing Finance Agency
The FHFA home price indexes are constructed using sales price information from all mortgages processed by FannieMae and FreddieMac. In order to expand the coverage to include other mortgages, the FHFA has recently introduced an “Expanded Index” that also includes information from county recorder offices. The latest information from this data series presents an even clearer picture of recent house price appreciation. In the fourth quarter, the expanded index data shows prices up 1.4% in Arkansas and up 1.6% for the U.S. Compared to the fourth quarter of 2011, prices were up 5.7% in Arkansas and 5.5% nationwide.
Source: Federal Housing Finance Agency
In order to accumulate enough sales-price data to provide reliable indicators for metro-area home prices, the FHFA also constructs a set of “All Transactions” indexes that include information from actual home sales as well as refinancing appraisals. As detailed in the table below, home prices have recently been on the increase in almost all of the state’s metro areas.
Source: Federal Housing Finance Agency
There is one exception to the recent trend: Home prices in Hot Springs have continued to decline over the second half of 2012. It is notable, however, that the housing market in Hot Springs remained strong well after home prices began to decline nearly everywhere else in the nation. That is, patterns in house prices in Hot Springs appear to be lagging behind the state and national trends. As shown in the chart below, home prices in Hot Springs have fallen by about 4.4% since the beginning of 2007 — the same rate of decline as the statewide average.
Source: Federal Housing Finance Agency
The metro-area chart also shows a wide divergence over longer-term house-price changes. Prices in Fayetteville and Memphis remain well-below their previous peaks, while many of the metro areas have seen relatively little net change in prices over the past 5 to 6 years. At the other extreme, house prices in Texarkana were barely affected by the general decline in prices over the past several years.
Yesterday’s report on home sales included data showing that average home prices were up 7.8% from October 2011 through October 2012. On a year-to-date basis, average prices were up 10.4%. Average sales prices are not necessarily a good measure of overall home values — they sometimes simply reflect changes in the mix of homes that are presently selling. If higher-price home sales are strong and lower-price home sales are lagging, we would see an increase in the average sales price even if overall home values are unchanged.
In this case, however, the realtors’ sales price data is corroborated by the latest information on home values from the Federal Housing Finance Agency (FHFA). The FHFA “Purchase-Only Index” for Arkansas shows home prices up 1.6% in the third quarter, and up 7.1% from a year earlier. For the nation as a whole, home prices were up 2.0% in the third quarter — 3.3% higher than the previous year. As information accumulates, it is becoming increasingly apparent that home prices have bottomed out and are are now showing at least modest rates of appreciation.
Source: Federal Housing Finance Agency
The FHFA home price indexes are constructed using sales price information from all mortgages processed by FannieMae and FreddieMac. In order to expand the coverage to include other mortgages, the FHFA has recently introduced an “Expanded Index” that also includes information from county recorder offices. The latest information from this data series also shows a turnaround in home prices. In the third quarter, the expanded index data shows prices up 1.2% in Arkansas and up 1.0% for the U.S. Compared to the third quarter of 2011, prices were up 5.4% in Arkansas and 3.4% nationwide.
Source: Federal Housing Finance Agency
In order to accumulate enough sales-price data to provide reliable indicators for metro-area home prices, the FHFA also constructs a set of “All Transactions” indexes that include information from actual home sales as well as appraisals associated with refinancing. Recent data for this set of statistics show smaller home price increases — perhaps because appraisers have recently been providing relatively conservative estimates of home values. Nevertheless, the overall pattern is similar, with prices appearing to have reached a trough, if not yet a clear upturn.
Source: Federal Housing Finance Agency
The all-transactions data shown above also includes price data for the state’s largest metro areas, Little Rock and Fayetteville. The distinctiveness of local market conditions is evident in this comparison. Prices in Northwest Arkansas have followed a pattern similar to the national average, while those in Little Rock have shown relatively small changes over time. As shown in the table below, home prices in the state’s other metro areas have shown differing patterns. In the third quarter, the all-transactions indexes rose in all metro areas except Little Rock (which was essentially unchanged). Compared to a year earlier, prices are higher in five metro areas, and are down only for Hot Springs, Little Rock, and Memphis.
The Arkansas Realtors® Association just released new sales figures for July and August. July home sales were essentially unchanged from the previous year, while August sales were down 5.6% compared to August of 2011. The sales downturn in August overstates recent weakness in the market: As shown in the figure below, sales were particularly strong in August 2011, so the percentage change reflects relative strength last year as much as it does relative weakness this year. Nevertheless, cumulative year-to-date sales as of August are down 2.0% from last year’s totals.
Source: Arkansas Realtors® Association
After seasonal adjustment, the sluggish sales growth of recent months is even more apparent. On a seasonally-adjusted basis, monthly home sales have been fluctuating within a range of 1,800 to 2,100 per month for the past year or so. Sales appeared to be slowly trending upward in the second half of 2011, but slowed somewhat in the spring and summer of this year.
Source: Arkansas Realtors® Association; Seasonal adjustment by the Institute for Economic Advancement.
Recent sales reports seem to suggest a shifting of sales activity around the state. Some of the larger real estate markets that were rebounding strongly a year ago have been areas of slower sales this year. For example, the central Arkansas counties of Pulaski, Saline and Faulkner were showing double-digit sales growth in mid-2011, but have slowed or contracted slightly in the latest monthly reports. The same pattern seems to characterize Craighead County home sales. On the other hand, the Northwest Arkansas counties of Benton and Washington are among the stronger performers in recent sales reports, compounding gains from last year. This rebound is welcome — and not particularly surprising — in light of the fact that Northwest Arkansas markets were hit harder by the housing market collapse and subsequent recession.
The real estate reports from July and August also documented sharp increases in median sales prices. In July, the median price was up 13.3% and in August it was up 17.3%. These increases reflect a combination of factors. First, they suggest that the higher-priced end of the housing market is showing more activity — this includes the impact of higher relative sales volumes in Northwest Arkansas. The higher sales prices also reflect the general improvement in home values, as evidenced by recent home-price data from the FHFA.
With home prices appearing to have bottomed-out and with mortgage rates at historic lows, conditions appear favorable for a sharper rebound in home sales. Factors holding back home sales include tight credit conditions and weak household balance sheets. Improving labor market conditions should help surmount these obstacles over time.
This morning, the Federal Housing Finance Agency (FHFA) released house price data for the second quarter of 2012. For Arkansas, the report was a mixed bag of results. The seasonally-adjusted “Purchase-Only Index” (which uses only sales price data) showed Arkansas house prices up 1.9% for the quarter and up 7.2% from a year earlier. In comparison, data for the U.S. showed prices up 1.8% for the quarter and up 3.0% from the previous year. On the other hand, the FHFA’s “All-Transactions Index” (which includes appraisal data from refinancings) showed prices declining. House prices were down 1.5% in Arkansas, and down 0.7% nationwide.
Source: Federal Housing Finance Agency Source: Federal Housing Finance Agency
The purchase-only index has the advantage of measuring only market transactions — where true value is revealed. The all-transactions index has broader coverage and incorporates more individual data observations. But neither is a perfect measure. One conclusion on which both methodologies agree: The house-price crash that has plagued the market since 2006 has not been nearly as severe in Arkansas as in the rest of the nation.
One drawback of both measures is the limited nature of the underlying data, which are restricted to mortgages financed by Fannie Mae and Freddie Mac. Missing in this sample are transactions for homes financed with nonconforming mortgages, including “jumbo” loans. In an attempt to broaden coverage, the FHFA introduced a third measure last year, the “Expanded-Data” indexes, which incorporate additional data from the FHA and from county recorder offices. The Expanded-Data indexes help to bring the FHFA measures into closer correponsdence with the famous Case-Shiller house price index.
As shown in the chart below, the expanded data indexes show larger peak-to-trough declines than either the all-transactions or purchase-only measures, but tend to validate the view that we are past the trough with prices beginning to recover. For the second quarter, the expanded-data series show Arkansas prices up 2.4% and U.S. prices up 2.0%. On a year-over-year basis, the Expanded-Data series show prices up 7.8% in Arkansas and up 2.4% for the U.S.
Source: Federal Housing Finance Agency
Metro Area House Price Data: Metro area data are available only for the All-Transactions measure. Consistent with the statewide reading for the second quarter, house prices as measured by this methodology were down across the state. Price declines ranged from -0.4% in Little Rock and Fort Smith to -5.4% in Hot Springs. Relative to the second quarter of 2011, however, house prices were measured as being higher in three metro areas — Fayetteville, Jonesboro and Little Rock. The longer-run record of house prices shows considerable diversity among the states metro areas. Compared to the second quarter of 2007, price changes range from +6.2% in Texarkana to -18.6% in Fayetteville.
The latest data from the Federal Housing Finance Agency (FHFA) suggest a slight increase in home prices nationwide, with prices in Arkansas increasing at a rate above the national average. Yesterday’s FHFA report emphasized the seasonally-adjusted purchase-only index which showed U.S. house prices up 0.6% from the previous quarter, and up 0.5% from the same quarter a year earlier — “the first annual increase since 2007.” By the same measure, house prices in Arkansas were up 0.3% for the quarter and up 1.3% from a year earlier.
Source: Federal Housing Finance Agency
The pattern of home-price changes across the nation shows a wide divergence in house price changes. Prices continue to decline in some areas of the country that experienced particularly dramatic home price increases during the housing price bubble and subsequently have experienced large declines (e.g. Nevada, California, Illinois and Georgia). Other states appear to be recovering (e.g. Florida, Arizona, and Michigan). Arkansas ranks #22 among the 50 states for its rate of home-price appreciation over the past year.
Source: Federal Housing Finance Agency
The FHFA all-transactions indexes (which include home refinancing appraisals) showed considerably less price-appreciation. For the U.S., the all-transactions index was down 1.3% for the quarter and down 1.4% compared to a year ago. In Arkansas, this index of house prices fell slightly from the previous quarter (-0.7%) but was up 0.5% from the first quarter of 2011.
The all-transactions index is important because it is the only measure that is published for all of the nation’s metropolitan areas. As shown in the table below, first-quarter changes in home prices for Arkansas metro areas were mixed. Compared to the fourth quarter of 2011, prices were down in five of the state’s metro areas, but showed fairly large increases for Hot Springs, Pine Bluff and Texarkana. Compared to a year earlier, however, prices were up in all MSAs except for Fayetteville and Memphis. From a longer-term perpsective, these are also the only two metro areas in which prices are lower than five years ago (2007:Q1).
New data from the Federal Housing Finance Agency show Arkansas house prices rising over the second half of 2011. The statewide average “All-Transactions Index” increased 0.3% in the fourth quarter, following a revised 0.8% gain in the third quarter. Comparable data for the U.S. showed a similar rebound in the second half, up 0.4% in the fourth quarter following a 1.0% increase in the third quarter. Arkansas home prices are still down 0.7% from the end of 2010, but evidence is accumulating that the trend of declining prices has abated.
Source: Federal Housing Finance Agency
Of course, house prices in different areas of the state do not move in unison. Fourth quarter changes in the FHFA indexes were mixed among the state’s metropolitan areas.
In the two metropolitan areas where prices have fallen the most over the past five years — Fayetteville-Springdale-Rogers and Memphis — fourth quarter data showed slight declines, but not enough to offset the increases of the previous quarter.
Prices in Texarkana also fell slightly, but the longer-term trend remains distinctly positive.
Hot Springs has seen rather dramatic price declines since the end of the recession, but had experienced rapid price increase over the previous three years.
In Pine Bluff, prices were up sharply in the fourth quarter, but not enough to erase price declines registered in 2010.
Prices in Fort Smith have risen slightly in the second half of 2011, and appear to have stabilized since the beginning of 2010.
Stability has characterized house prices in Central Arkansas. On net, prices in the Little Rock-North Little Rock-Conway metro area have changed little since 2007, when prices in other areas of the nation began to decline.
Home prices in Jonesboro never did experience any substantial price declines. Beyond some temporary ups and downs, prices have continued to rise steadily.
Source: Federal Housing Finance Agency
Although Arkansas house prices appear to have stabilized toward the end of 2011, downward price pressures remain. In particular, ongoing foreclosure activity and other sales of “distressed” properties tend to drive average prices lower. This is more likely to be a factor in areas of the state where general economic conditions remain weak. Nevertheless, the fact that mortgage delinquency rates and foreclosure activity are lower in Arkansas than elsewhere in the nation bodes well for the outlook.
