Northwest Arkansas housing market continues to boom, January sales rise 26%

January was one of the warmest months on record in Benton and Washington counties, and the housing market also heated up with more buyers than sellers pushing average home prices to new highs in Washington County at $206,065, well beyond the $202,605 peak in July 2007.

Also rising are the number of overall sales to begin 2016. Agents in the two-county area sold 527 homes in January with a cumulative value of $102.589 million, a gain of 26% over the $81.298 million reported a year ago, according to Eric Harris, agent with Weichert Downum Real Estate in Springdale.

It was one of the best January’s on record across the region with Benton County reporting 334 sales worth more than $62.819 million, moving up 36.7% over the 247 sales valued at $45.932 million a year ago. In Washington County agents sold 193 homes in January with a cumulative value of $30.770 million, up 12.5% year-over-year, according to data provided by Harris.

“Home sales in Northwest Arkansas remain strong even during the winter months. Rental demand is high and investors might want to look at purchasing rental properties as an investment,” Harris said with regard to opportunities he sees in the market.

While agents are pleased with the active sales pace to start 2016, the real story is in escalating home prices, following a pattern seen across many larger metros in the nation. Lawrence Yun, chief economist of the National Association of Realtors, has said rising home prices show no sign of letting up in areas where there is rapid growth, low unemployment and limited supply of homes for sale.

HOME PRICES, AFFORDABILITY
Aside from the summer of 2007, agents say there has never been better time for sellers in Northwest Arkansas. Since the market trough in May 2011, average home prices in Washington County are up 48% as of January. The average home price last month in Washington County was $206,065, nearly double the $139,080 low reached in May 2011.

The median home price also moved higher to $162,000, or $93.37 per square foot. in January. Just in the past thee years the median sales price in Washington County is up 17.43%. Median sales prices are up about 2% year-over-year in Washington County.

Kathy Deck, director for the Center for Business and Economic Research at the University of Arkansas, has said the growth seen in local home prices appears to be sustainable and well within the average 3% to 4% annual rate historically.

The local market suffered steep lows with a 30% decline from the peak to the trough when the supply glut hit in late 2007. Hence the uptick experienced in recent years has been making up lost ground. Market watchers expect to see home price increases stay within historical ranges.

In Benton County average home prices rose to $188,082 in January which was up 5.23% from a year ago, but still well below the $218,340 market peak achieved in August 2017. That said, median home prices – the middle price of the market – continue to escalate toward new highs at $164,750 in January. Half of the homes in the county sold for more than $164,750 and half sold for less. In the past three years the median sales price in Benton County has risen 17.2%. Year-over-year the median price is up $12,000 or 7.8%.

Deck, said Northwest Arkansas continues to see its per capita income levels rise faster than the state and nation thanks in part to full employment status and a diversified job base. The average per capita income in Benton and Washington counties is $50,000, which is roughly $5,000 more than $40,000 national rate, a trend that has been rising since 2014, according to Deck.

Homes in Benton County remain affordable for those earning the average per capita income or median family income of $61,706 given the median price of $164,750. Making a 5% downpayment a buyer would need an income of $43,000. With a 10% downpayment the required income would be $40,000, according to NAR calculations.

In Washington County, where the median household income is lower at $54,190 and the median price is $162,000, affordability is a little tighter but still feasible. Low interest rates also continue to help buyers with affordability.

Stephen Brooks, an agent with Keller Williams in Fayetteville, said Interest rates declined slightly in January as struggling equity markets created downward pressure on the safe haven assets that influence mortgage rates, He reports that Freddie Mac’s 30-year fixed rate stands at 3.81%, while the 15-year fixed rate is 3.10%.

HOME SALES DATA (January 2016)
Benton County
Unit Sales
2016: 334
2015: 257
2014: 258

Sales Volume
2016: $62.819 million
2015: $45.932 million
2014: $41.986 million

Median Sales Price
2016: $164,750
2015: $152,750
2014: $129,900

Washington County
Unit Sales
2016: 193
2015: 179
2014: 145

Sales Volume
2016: $39.770 million
2015: $35.365 million
2014: $26.059 million

Median Sales Price
2016: $162,000
2015: $159,125
2014  $150,000