August Home Sales Sputter
Last updated Tuesday, September 16, 2008 6:40 PM CDT in Business
By Kim Souza
THE MORNING NEWS
SPRINGDALE -- Low interest rates and aggressive seller perquisites failed to boost regional home sales through August, with the number of pending contracts falling 27 percent from a year ago, according to a report released by Paul Bynum of Mountdata.com, an independent real estate data provider.
Real estate agents in Benton and Washington counties reported 3,669 cumulative sales in the first eight months of the year, compared with 4,957 a year ago and 5,490 in 2006.
Total sales volume is down $46 million from a year ago, pinching agent pockets by roughly $2.76 million in fewer commissions. Through August, sales volumes totaled $680.11 million, down 27 percent from a year ago.
Monthly average sales are about half of the levels they were in 2006, when the residential market peaked, according to the data.
The slack in home sales is directly related to muted buyer demand, in part held down by more rigid lending criteria such as creditworthiness and down payments, said Kathy Deck, director for the Center for Business and Economic Research.
Other factors weighing down buyer interest include concern for the economy and job security, as well as a reduction in disposable income relating to inflationary prices of both food and fuel, Deck said.
Mountdata's September report also indicated existing home inventory levels dipped about 2 percent from last month -- with 4,854 homes listed for sale, compared to 4,677 reported in August.
Deck said the existing home inventory is still too high with an average 13-month supply, and has pledged to watch this market closely in the coming quarters.
A 30 percent decline in the number of new construction permits this year has helped shrink new construction oversupplies.
New construction home inventory dropped 5.4 percent between August and September, according to the report.
Real estate agents agree that motivated builders offering special buying incentives are helping more buyers get into new homes with no money out-of-pocket.
Kendall Riggins, broker with Crye-Leike Real Estate in Springdale, said some local banks allow builders to front buyers up to 6 percent of the sales price to cover a 3 percent down payment and the closing costs.
"Rural Development Loans are also selling very well now, because they still allow buyers 100 percent financing, if they meet the income qualifications and acceptable debt-to-income ratios," Riggins said.
Walt Fenton, mortgage manager with First Security Bank in Fayetteville, said the RD loans can work for home purchases in cities with populations under 25,000 based on the 2000 Census. That includes Bentonville and Bella Vista, and will likely be eliminated following the next census, he said.
Fenton added that the Veteran's Administration home loan also provides 100 percent financing for qualifying veterans, and the 30-year fixed interest rate offered by FHA, RD and VA is a low 5.5 percent.
"If buyers have minimum credit scores of 640 or so, and a low debt-to-income ratio, there are programs that could help them overcome the lack of a down payment," Riggins said.
He said the new $7,500 tax credit from the U.S. Government, low rates and some of the best home prices in recent history should help any potential home buyers still sitting on the fence to take the plunge.
Fast Facts
Regional Real Estate Market As of Aug. 30
2008 2007 % Change
Median home price $149,900 $156,425 -4.17
Price-per-square foot $89.6 $97.1 -7.72
Months supply of inventory 12.8 11.2 +14.2
Days on market 77 67 +14.9
Source: Mountdata.com
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