Arkansas remains one of the less expensive places to live in the country. Even in Northwest Arkansas where median home prices rose 8% year-over-year, Irvine-based RealtyTrac notes that it’s still cheaper to purchase a home than rent.
A new RealtyTrac study found that purchasing a home was more affordable than renting in 291 U.S. counties – or 58% of all counties – including counties that are home to Chicago, Phoenix, Miami, Las Vegas and Detroit. Also included in those findings were the central Arkansas counties of Faulkner, Pulaski and Saline. The Fort Smith and Jonesboro metros were not included in the RealtyTrac report.
The RealtyTrac study also found that rent is rising across much of the country at levels that exceed wage growth. Home prices also are rising at roughly twice the rate of wages, but some Realtors say home affordability is still possible in markets like Little Rock, Springdale and Fort Smith.
“Renters in 2016 will be caught between a bit of a rock and a hard place, with rents becoming less affordable as they rise faster than wages, but home prices rising even faster than rents,” said Daren Blomquist, RealtyTrac vice president. “In markets where home prices are still relatively affordable, 2016 may be a good time for some renters to take the plunge into homeownership before rising prices and possibly rising interest rates make it increasingly tougher to afford to buy a home.”
Perhaps that’s one reason Arkansas home sales are up more than 9% through the first 10 months of 2015, according to the Arkansas Home Sales Report managed by Talk Business & Politics. Michael Pakko, chief economist and state economic forecaster for the Institute of Economic Advancement for the University of Arkansas at Little Rock, said through October there is a good indication of continuing strength in the housing market and more evidence that 2015 should close out as a great year for homes sales.
Kevin King, broker with Weichert King Real Estate in Fort Smith, said rental prices are rising in Fort Smith as investors continue to be active in that market. He also expects that as rental rates increase in 2016, more renters will become homeowners.
REGIONAL RENT LEVELS
In central Arkansas, rents for three-bedroom housing was reported at $1,100 monthly, which was is expected to be up just 0.1% over the next year, according to the RealtyTrac study. Rents range from 34% of average wages in Faulkner County, to 29% of wages in Pulaski County and 39% of wages in Saline County.
On a national level the average rental costs are 37% of wages, the study noted.
Northwest Arkansas rent is expected to fall 3% this next year because of the added units coming online in Benton and Washington counties. RealtyTrac reports 3-bedroom rentals at $1,126 in Northwest Arkansas, or roughly 32% of average wages in Washington County and 27% of wages in Benton County.
When comparing home affordability in the Arkansas counties to average wages, the report found homes to be most affordable for residents of Benton County, in part because of their higher wage growth. In Benton County, the average percent of wages spent on housing is 23.1%, well below the 38% national average noted in the RealtyTrac report. In Washington County the figure was 29.7% of wages. Again Saline County showed the largest percentage of wages used on housing at 30.8%, compared to 24.7% in Pulaski County and 25.4% in Faulkner County.
RealtyTrac also found home affordability is an important draw for the Millennial Generation. The study found that Pulaski County experienced an 18% growth in its Millennial population between 2008 and 2013. The county reports 22.3% of its residents are Millennials. Washington and Faulkner counties report the largest percentage of Millennial residents at 26% of their populations. Between 2008 to 2013 Washington County has seen a 6.6% increase in its Millennial population, while Faulkner County posted a 4.4% decline over that same period.
Blomquist said Millennials are drawn to markets where rents or home affability ratios are below 30%.
Baby Boomers comprise 23.3% of Saline County’s population as of 2013, a decline of 7.3% from the five years prior, according to the RealtyTrac report. Pulaski County reports 22.7% of its population as Boomers, also declining 13.1% since 2005. Northwest Arkansas Baby Boomers have left the region since 2008. In Washington County the 18.3% of Boomers is down 16% and Benton County’s Boomer demographic has decreased to 20%, which is 10% lower than it was in 2008.