As described in a previous article on Arkansas Economist, realtors’ associations provide two independent measure of Arkansas home sales. The National Association of Realtors® (NAR) conducts nationwide surveys to estimate total U.S. home sales, and provides quarterly estimates of sales at the state level. Locally, the Arkansas Realtors® Association (ARA) publishes monthly totals of Homes Sold in Arkansas by Realtors®, which represents a compilation of data from participating multiple listing services around the state.
Despite their differing methodology and coverage, the two sources of information about the Arkansas real estate market reveal the same pattern: Sales volumes declined steadily during 2007 and 2008, reaching a low point in the fourth quarter of 2008. During 2009, however, sales showed steady improvement.
The chart below illustrates these patterns. It shows both the NAR and ARA measures of home sales expressed in directly comparable forms — as indexes normalized to equal one in 2007.* The chart shows that in sales in the fourth quarter of 2008 had fallen by nearly one-third from the average volume of 2007. After steady increases during 2009 (seasonally adjusted), sales in the fourth quarter of 2009 were back up to well over 80 percent of their 2007 pace.
The outlook for Arkansas’ housing market is generally good. There may be brief sales downturns associated with the expiration of home-buyer tax incentives later this year and with inevitable increases in mortgage rates as economic expansion picks up pace. Nevertheless, the steady increase in sales during 2009 suggests that the residential real estate market in Arkansas is well on its way to recovery.
Sources: National Association of Realtors®, Arkansas Realtors® Association, Moody's Economy.com, Institute for Economic Advancement. *The NAR measure is published quarterly on a seasonally adjusted basis. The specific measure used in the chart is Existing Single-Family Home Sales, as reported by Moody’s Economy.com. The ARA measure is published monthly and is not seasonally adjusted. To construct the chart, ARA data were seasonally adjusted using the method described in a previous post, then averaged over quarters. Raw data and monthly reports for Homes Sold in Arkansas by Realtors® is available at the Arkansas Realtors® Association blog, The Arkansas Realtor®.
Even before the onset of the recent recession, residential real estate markets have been at the heart of our national economic tribulations. And having just purchased a home in the Little Rock area, I’ve recently taken a personal interest in the Arkansas housing market. So how did the Arkansas housing market fare during the recession, and is it now recovering?
Data on existing home sales in Arkansas are available from both the National Association of Realtors® (NAR) and the Arkansas Realtors® Association (ARA).
Last week (on November 10), the NAR released its quarterly report on state-level existing home sales. The report showed that the markets are improving in most areas of the country, with 45 states and the District of Columbia showing sales increases in the third quarter relative to the second quarter (seasonally adjusted). Arkansas was one of the states showing an increase, up 2.7%. This was the third consecutive increase for Arkansas home sales, following a 4.2% rise in the second quarter and a 3.6% increase in the first quarter. The magnitudes of the quarterly gains are relatively modest compared to some other states, but Arkansas was one of only 6 states to experience sales increases over all three quarters.
Although these data are indicative of the performance of the Arkansas market relative to other parts of the country, they do not necessarily represent the most accurate assessment of market conditions for the state. According to the the NAR’s own description of its methodology, the monthly survey covers only about 30-40% of all existing home sale transactions. The sample data are used to construct aggregates for the four census regions of the U.S., then the State data are derived from those totals.
Indeed, according to Ethan Nobles of the ARA, it is his understanding that the NAR survey excludes some of the important local markets in Arkansas. The ARA releases its own monthly summary of home sales, consisting of the total number of homes sold by Realtors® across the state. The data are subject to some revision as late reports come in, but they represent (as best as possible) a full accounting of the number of homes sold in the state.
The most recent report from the ARA came out earlier this week (November 16). It shows that home sales were up in September over the previous year. This was the second month in the past three that showed a year-over-year increase. The data, shown in the chart below, suggest that home sales in Arkansas have been on a recovery path throughout 2009.
Source: Arkansas Realtors® Association
However, it is also evident from the chart that there is a pronounced seasonal pattern in the data. Home sales tend to be lower during the winter months, and higher during the spring and summer. This makes it difficult to discern trends over periods less than a year in length. And in particular, it is hard to tell how much of the increase since January 2009 represents actual growth as opposed to regular seasonal movement.
With a longer data series, it would be possible to apply standard statistical techniques directly to the data. In the absense of a long time-series, however, more rudimentary techniques can suffice: The NAR’s monthly report on existing home sales provides estimates of both seasonally-adjusted and not-seasonally-adjusted estimates for the U.S. and the four census regions, over the past 12 months. The ratio of these two sets of estimates provide implicit seasonal factors, as calculated by the NAR (using a census X-11 procedure).
Applying the implicit seasonal factors for the Census South Region to the data for Arkansas from the ARA, we obtain a rough estimate of seasonally-adjusted Arkansas sales. The chart below illustrates the result of this procedure, with the data multiplied by 12 (so they present annualized measures), and averaged over quarters (to smooth out month-to-month variability).
Source: Arkansas Realtors® Association (ARA), National Association of Realtors® (NAR), and the Institute for Economic Advancement (IEA).
It is clear from this chart that home sales in Arkansas were sliding downward before and during the first part of the recession, then dropped sharply in the fourth quarter of 2008. Since then, sales have steadily increased. This confirms the pattern observed in the NAR data suggesting that residential real estate markets in Arkansas have been consistently improving since the beginning of the year.
