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
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.
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
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.
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
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
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
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%.
Recently released data from the Federal Housing Finance Agency (FHFA) shows that house prices in the U.S. continued to decline during 2010, with average house prices down 1.3 percent nationwide. Here in Arkansas, the decline was somewhat larger — down 2.2 percent.
As shown in the table below, the average price decline for Arkansas is skewed by price changes in the northwest part of the state. House prices in the Fayetteville-Springdale-Rogers metro area were down 4.1 percent and in Fort Smith prices were down 3.6%. In the state’s other metro areas, price declines were smaller than the national average. In Texarkana, house prices were up slightly.
Source: Federal Housing Finance Agency
This is the third year of statewide house price declines. The FHFA housing price index for Arkansas peaked in the first quarter of 2008. However, the pattern of price changes has differed from one metro area to another. From 2000 until the peak, house prices in the Fayetteville area had risen by 51 percent. Over the past 5 years, however, prices in that region are down nearly 10%. Prices in Hot Springs continued to rise well after the peak was reached in other markets, but have fallen sharply in the past two years. In the state’s other metro areas price gains in the first part of the decade were more modest — and recent price declines have been commensurately smaller. Over the past five years, cumulative price changes have been positive in all the state’s metro areas except Fayetteville.
“the expiration of the home-buyer tax credits is the elephant in the room”
Information on residential real estate markets has dominated the news over the past few days. When it comes to evaluating the housing markets in Arkansas, recent reports from various sources show a consistent picture of recent trends, but the outlook is very uncertain.
Home Sales
The Arkansas Realtors Association (ARA) released statistics this week showing that June home sales were up slightly over the previous year, but down from the previous month. As shown in Chart 1 below, housing sales follow a recurring seasonal pattern, with the summer months tending to have higher sales than winter months. July is often the peak sales months of the year, but so far this year, sales peaked in April and have declined since then.
Chart 1:Source: Arkansas Realtors Association
Disentangling the cyclical and seasonal effects is crucial to understanding recent trends. Chart 2, below, shows seasonally adjusted data that are averaged over calendar quarters to smooth out some of the month-to-month variability (the data are seasonally adjusted using the technique described in a previous article).
Chart 2:Sources: Arkansas Realtors Association, National Association of Realtors
With these refinements, the cyclical pattern of home sales is more evident: After declining throughout 2007 and 2008, sales steadily increased over the course of 2009. The first quarter of 2010 saw a sharp decline, followed by a rebound in the second quarter. Recent data for Arkansas home sales from the National Association of Realtors (NAR), also displayed in Chart 2, confirm the recent quarterly pattern in the adjusted ARA data.
The sharp decline in the first quarter of 2010 can be partly attributed to weather. Sales are usually low in the winter months, and this past winter in Arkansas was particularly ill-suited to house shopping. Sales recovered in the second quarter to about the same pace as in the fourth quarter of 2009.
But when it comes to assessing the outlook for home sales, the expiration of the home-buyer tax credits is the elephant in the room. Sales in the fourth quarter of 2009 were boosted by last-minute purchases under the original tax credit program for first-time buyers that expired at the end of October. Weather might have kept activity low in the first quarter, but the impending deadline for taking advantage of the extended and expanded home-buyer tax credit on April 30 was undoubtedly a factor in the second quarter resurgence.
The recent tax-credit deadline required that a contract be in place by the end of April, but the closing date could be later. As a result, recorded sales in May and June included some transactions that are associated with last-minute contracts to qualify for the credits. The crucial question is whether the second quarter increase reflects sales that would have taken place later in the year in the absence of the tax-credit deadeline — implying that we should expect a sharp decline over the next few months — or whether it reflects a sustainable improvement in market conditions.
Preliminary information suggests that we will see a drop-off in the third quarter. New data on existing home sales and new home sales nationwide showed sharp declines in July. Information on home sales in central Arkansas for July show that Arkansas housing market experienced this downturn as well. For example, sales in Pulaski county were reported to be down 30.2 percent from the previous month and down 31.5 percent from July 2009. When the statewide sales figures for July are released by the ARA next month, they are likely to show a sharp downturn.
Arkansas home sales over the remaining summer months will probably be relatively weak, as the market returns to an equilibrium undistorted by government subsidies. On the other hand, mortgage rates remain low and house prices have fallen (see below), so the market continues to be favorable for buyers. This factor should help sustain sales later in the year.
House Prices
In addition to reports from the ARA and NRA, new data on housing prices were released this week by the Federal Housing Finance Authority (FHFA). Since the housing downturn began in early 2007, the FHFA purchase-only price index has shown a distinctly lower rate of appreciation than the all-transactions index, which includes appraisal data from refinancings. Ultimately, it is the market sales price that matters, so the purchase-only index provides more accurate information on current market conditions. However, refinancings are more likely to be prevalent in areas where houses are retaining their value, so the all-transactions index might give a better indication of long-run home values. [See also, Comment: Differences Among Home-Price Indices]
As shown in Chart 3, below, the two measures of house prices have diverged considerably since the market downturn began, with the purchase-only index showing considerably more variability. Over the past four quarters, the purchase-only index has experienced quarterly ups and downs, but has changed little on net. The all-transactions index has fallen by 2.4 percent.
Chart 3:
Source: Federal Housing Finance Authority
Under either method, house prices in Arkansas have not experienced declines as large as the nationwide average. Over the past four quarters, for example, the FHFA all-transactions index for the U.S. showed a 5 percent decline compared to the 2.4 percent decline in Arkansas.
Chart 4, below, compares the two FHFA house price indexes for Arkansas with the average sales-price data from ARA. The series are normalized to take on a value of 1.0 in the first quarter of 2007, so the data presented in the chart show cumulative price changes since that time.
Sources: Federal Housing Finance Authority, Arkansas Realtors Association, and authors' calculations
Not surprisingly, the average price data from ARA shows some similarity to the FHFA purchase-only index. Both measures are based on prices of actual sales. Both series show a sharp decline in the first quarter of 2010. This drop is associated with the decline in home sales discussed earlier. With fewer homes selling in general, the segment of the market including foreclosures and other distressed sales constituted a larger share of total sales, depressing average prices. With the pickup in market activity in the second quarter, the price spike was also reversed.
Cumulatively, from 2007 through the second quarter of 2010, house prices in Arkansas have decline modestly. All three measures of home prices show prices down over the period, but by magnitudes of only about 1 to 3 percent.
The FHFA also releases all-transactions indexes for metropolitan areas. As shown in the table below, these data show that house price changes vary considerably across Arkansas’ metro areas.
Source: Federal Housing Finance Authority
Northwest Arkansas has experienced the largest and most persistent declines in house prices. Earlier in the decade, the Fayetteville metro area showed the greatest appreciation in the state, so declines more recently serve to offset some of those earlier gains. Hot Springs has recently shown fairly large declines as well, but compared to five years ago, prices are up about 14.6 percent. Data for Jonesboro, Texarkana and Little Rock show that house prices increased in the second quarter, with prices also higher than a year ago. In fact, Jonesboro serves as a counterexample to the experience of Northwest Arkansas: Rather than rising sharply in the early part of the decade and subsequently declining, house prices in Jonesboro have experienced a relatively slow but steady upward trend.
This morning, the Federal Housing Finance Agency (FHFA) released the latest data on house prices for states and metropolitan areas. The data for Arkansas show a rather sharp decline in in the first quarter of 2010: The purchase-only index was down 2.5 percent from a year earlier, while the all-transactions index was down 1.4 percent over the same period. (For a description of these indexes, see the previous post, Home Prices in 2009.)
Source: Federal Housing Finance Agency
In the first quarter of 2010, house prices were down rather sharply in four of the state’s metro areas. [For Metropolitan Statistical Areas (MSAs), only the all-transactions indexes are available.] Prices were down 4.8 percent in Fort Smith, 2.7 percent in Northwest Arkansas, 1.5 percent in Jonesboro and 1.1 percent in the Little Rock area. Hot Springs, Pine Bluff and Texarkana all recorded small increases for the quarter.
Source: Federal Housing Finance Agency
Compared to a year earlier, house prices are lower in every Arkansas MSA except Pine Bluff. Over the longer run, however, prices in each of the states MSAs are higher than five years ago (2005:Q1).
Data covering the end of 2009 continue to roll in. This week, we received new information about home prices from two independent sources.
First, the celebrated S&P/Case-Shiller index was released on February 23, showing that home prices nationwide were up 1.1 percent in the fourth quarter (seasonally adjusted), following a 3.3 percent decline in the third quarter. Over the past four quarters, the Case-Shiller nationwide index registered a decline of 2.5 percent.
While the Case-Shiller index is a good measure of home values nationwide and particularly in the nation’s largest metropolitan areas, its component indices contain no specific information about Arkansas. An alternative is the similarly-constructed set of house price indices produced by the Federal Housing Finance Agency (FHFA). The latest set of estimates from this source was released yesterday (February 25). The FHFA’s purchase-only index (comparable Case-Shiller) showed that house prices nationwide were basically flat in the second half of 2009 (up 0.1 percent in the third quarter and down 0.1 percent in the fourth). For the year, this measure showed house prices down 1.2 percent.
For Arkansas, the FHFA sales only index showed an increase of 0.5 percent in the fourth quarter, and realtive to a year earlier, house prices were up by 1.5 percent. As shown in the chart below, this continues a clear pattern: During the period of rapid price appreciation in the first half of the decade, Arkansas home prices grew more slowly than the nationwide average. Since 2007, price changes in Arkansas have been similarly muted — we haven’t seen the sharp declines that have been evident in other parts of the country.
Source: Federal Housing Finance Agency
The FHFA also produces an alternative “all-transactions” index that includes appraisals from refinancings in addition to sales-price data. By this measure, house prices have recently shown more weakness, with prices down 1.9 percent in Arkansas and down 4.7 percent nationwide (from 2008Q4 to 2009Q4). Note that Arkansas home prices have remained more stable than those in the rest of the country, using either measure.
Whether the purchase-only or all-transactions index is a better measure of home values in general is an open question. [See Comment: Differences Among Home-Price Indices] But by adding data observations from refinancing appraisals, the FHFA is able to construct indexes for smaller geographic areas, including all of the nations Metropolitan Statistical Areas (MSAs). The table below shows how home prices in Arkansas’ MSAs fared during 2009, in comparison to recent years.
Source: Federal Housing Finance Agency
Home prices fell in most of Arkansas MSAs in 2009, but the declines were generally smaller than the U.S. average. The only exception was in the Northwest Arkansas, where prices have followed a pattern similar to the nationwide average over the past few years. Home prices were also down sharply in Hot Springs in 2009, but that figure represents the first annual decline after a series of fairly large increases. Falling house prices in Little Rock and Pine Bluff also represented the first annual declines in the past five years. Jonesboro and Texarkana both experienced modest house-price increases in 2009, and the data show continued strong appreciation in Fort Smith.
In some metro areas around the country–including many of those included in the Case-Shiller index–home prices have fallen sharply over the past two to three years following a period of exorbitant price increases. The FHFA data show considerably more stability in Arkansas, with price declines in 2009 representing only a modest departure from the trend of steady appreciation over time.
