Counties in Northwest and central Arkansas are among the majority counties in the nation to see home prices still affordable relative to historical norms, according to new report from Irvine, Calif.,-based RealtyTrac.
The report found that 9% of counties in the nation had housing that was less affordable than historical norms.
Findings for Northwest Arkansas might come as a surprise given that median home prices across Benton and Washington counties have risen consistently over the past four years. The report showed median prices in Benton County have risen 21.3% since their post recession lows in the first quarter of 2009. In Washington County home prices are up 12.8% over their low in the third quarter of 2009.
The RealtyTrac affordability index is based on the percentage of average wages needed to make a monthly house payment on a median-priced home with a 30-year fixed rate and 3% down payment including property taxes and insurance. The index did not provide data or other Arkansas metro areas.
The affordability index reading in Benton County was 113. Readings under 100 indicate less affordable housing. At $142,000 the median home price for Benton County in the first quarter of this year was up 5.18% from the same period in 2015. Meanwhile year-over-year wages grew at an average of 3%, meaning that pricing growth outpaced wage growth last year, according to the report. It takes 22.1% of the average wage to make a house payment at the $142,000 median price. This compares to 30% at the national level where median homes prices were $199,000.
The study found that homes were most affordable in Benton County in the first quarter of 2013, when the median price was $113,000 and the average weekly wage was $1,340. Homes were least affordable just ahead of the recession in third quarter of 2007 when the median price was $147,000 and the average weekly wage was $712.
The new affordability reading in Washington County was 140. The median home price of $145,000 in the first quarter of this year is down from $166,000 a year ago, a 13% drop in median prices after months of consecutive increases. The drop in median prices helped the affordability factor in the county, given that wage growth year-over-year was up just 2%. It takes 27.3% of the average wage to make the median house payment for a $145,000 home, down from 38.1% of wages to make the house payment at historical median price levels.
Homes were most affordable in Washington County in first quarter of 2013 when the median sales priced dropped to $101,880 and the average weekly wage was $828. This is a far cry from the least affordable time to purchase in third quarter of 2007 when the median home price rose to $250,000 and the median weekly wage was $665. The average interest rate at this time was 6.3%, compared to 3.95% in the most affordable quarter.
“While the vast majority of housing markets are still affordable by their own historic standards, home prices are floating out of reach for average wage earners in a growing number of U.S. housing markets,” said Daren Blomquist, senior vice president at RealtyTrac. “The recent drop in interest rates has helped to soften the blow of high-flying price appreciation in some markets, but the affordability equation could change quickly if interest rates trend higher and home prices continue to rise faster than wages.”
Real estate agents say there is no perfect time to purchase a home but historically interest rates are low and home prices are moving up in many neighborhoods. They explain the recent drop in Washington County median prices to more smaller and lower-end home sales this year as compared to higher-end sales. Agents polled by Talk Business & Politics do not think the lower median price in Washington County is the beginning of a downward trend – in fact they see it as an aberration.
Eric Harris, agent with Weichert Real Estate in Springdale, said there were fewer new home sales in Washington County and perhaps that weighed on the median price.
In Pulaski County the median home price in the first quarter of this year was $125,000, down 7% from the $134,000 reported a year ago. The affordability reading stood at 129. It would take 21.3% of wages to make a house payment on a $134,000 home, lower than the 27.4% historical norm for the county and also below the 30% national rate to start 2016. The research found the most affordable time to purchase a home in Pulaski County was late last year as median home prices were $138,000, down 9% from the prior year, while wages increased 2%. The least affordable time to purchase a home would have been in the second quarter of 2006.
In neighboring Faulkner County, the affordability index was 113 and the median sales price to start 2016 was $131,000, up 6% from a year ago. It would take 26.6% of median wages to make a house payment at the $131,000 price. Homes were most affordable in fourth quarter of 2014 when median home prices were $135,088, down 3% from the prior year while wages grew 2% year-over-year. The least affordable time to buy a home in Faulkner County was the fourth quarter of 2007, just ahead of the 2008 recession.
MEDIAN HOME PRICES (first quarter of each year)