Year-to-date home sales through the first four months of the year in Northwest Arkansas show signs of leveling off following a red-hot 2020.
Real estate agents combined to sell 3,312 residential properties in Benton and Washington counties through April. That’s according to data from the Matrix software platform used by the Northwest Arkansas Board of Realtors (NABOR) and provided to the Northwest Arkansas Business Journal by Marcus Necessary, vice president and executive broker with Weichert, Realtors-The Griffin Co.
According to the data, those figures represent a slight decrease (0.8%) from 3,340 home sales in the year-ago period.
Despite the COVID-19 pandemic and all its challenges, Northwest Arkansas home sales in 2020 increased throughout the year and closed up nearly 13% from the comparable 2019 figure, more than double the growth rate from the previous year.
Amid a continuing inventory crunch, home prices continue to soar. This year’s combined sales volume through April is up 14.2% — $981.7 million in the first four months this year, compared with $866.7 million in the first four months of 2020.
In Benton County, the average home sale through April had an average value of $304,505, up 13.3% from $268,505 in the same four-month period of 2020. In Washington County, the average home sale price through March was $280,344, up 10.3% from $243,464 last year.
Benton County reported 638 home sales worth a combined $189.9 million in April. That compares with 615 and $176.7 million in the year-ago month. In Washington County, agents sold 323 homes in April — up from 307 last year — with a cumulative value of $90.1 million, up from $76.3 million.
From a national perspective, a report issued May 11 by the National Association of Realtors nearly every metro area it tracks — 99% — recorded year-over-year price increases in the first quarter of 2021.
“Significant price increases throughout the country simply illustrate strong demand and record-low housing supply,” Lawrence Yun, National Association of Realtors chief economist, said in a statement. “The record-high home prices are happening across nearly all markets, big and small, even in those metros that have long been considered off-the-radar in prior years for many home seekers.”
Stuart Collier, the principal broker of Collier & Associates Realty, which has offices in Fayetteville, Farmington and Bentonville, said the Northwest Arkansas market is in line with the national trends. He described it as a “price appreciation trifecta” of low interest rates, low supply and increased construction costs.
“I think we will continue to see incremental price appreciation until interest rates rise and a significant amount of inventory comes to market,” Collier said. “The number of homes sold may stay flat, but prices will continue to increase due to lack of inventory and low rates.”
Collier also said buyers without significant cash reserves are experiencing difficulties.
“Many times, appraisal contingencies are being waived with buyers covering the difference in cash or offering full cash offers altogether,” he explained. “That’s affecting first-time home buyers and younger purchasers who are competing with investors and others with a more significant cash reserve, which is what it takes to win in this market while competing with multiple offers.
“I don’t foresee that changing for the rest of the year. It will take time for rate increases and significant time for new inventory to meet demand.”
Misty McMullen, principal broker and owner of McMullen Realty Group, which has offices in Bentonville and Rogers, said home prices would likely continue to rise until inventory catches up, whether it be resale or new construction.
“I recently read a survey of economists and when they expect inventory to grow again, and the consensus was the second half of this year into the first quarter of next year,” she said. “That is pretty consistent with what I am experiencing with my new home builders.”
McMullen, whose firm finished 2020 with a residential sales volume of nearly $90 million, also reported an uptick in out-of-state buyers, especially from California.
“With many folks now working from home in the post-pandemic world, it has allowed many to live in more cost-friendly parts of the country and work their jobs remotely,” she said. “I expect this will continue for the foreseeable future.”
Lynn Smith, area lending manager for Bank of America’s Arkansas market, also pointed to a lack of inventory as a critical issue in the market.
“We have a large population of first-time and second-time homebuyers, and homeownership is really important to them,” she said. “According to Bank of America’s latest Homebuyer Insights Report, nearly half (46%) of respondents say that building equity is more important now than ever before. In a competitive market like our region, where you may be competing against all-cash offers, it is critical to get preapproved for a home loan as early as possible, ideally before you begin your search. Having a preapproval shows that you are serious about becoming a homeowner and taking the necessary steps to get your finances and creditworthiness verified by a lender.”
Smith also pointed to Bank of America’s research indicating that people are reassessing how their living space and surroundings fit into their lives as they spend more time at home.
“Human connection, a sense of community, and good neighbors are just some of the key priorities for today’s homebuyer,” she said. “Younger generations are looking for a multifunctional space as the home has become an office (45%), a school (31%), a movie theater (28%) and a gym (27%).”