Experts Predict Slow Housing Market for 2009

Those waiting to see some improvement in the Northwest Arkansas real estate market might have to look beyond the first part of 2009.

Real estate analysts, from mortgage lenders to Realtors, are predicting a long recovery time for the weakened housing market.

Forecasters said the outlook in Northwest Arkansas for the coming year depends on many factors, including the unemployment rate, population growth and consumer confidence.

One of the major determining factors of the real estate market is job growth, according to Kathy Deck, director of the Center for Business and Economic Research at the University of Arkansas.

“Job growth is the key to population growth and population growth is the key to what happens in the real estate market,” she said. “Hopefully (employment growth) will remain positive in Northwest Arkansas as it has so far, but it’s likely to be muted through 2009.”

Slow job growth, combined with the fact that people in other parts of the country are having a hard time selling their homes, means population growth is likely to be muted as well, Deck said.

“The national economy is going to weigh on us,” she said. “Someone in California, for example, might not be able to sell their house, which means their mobility is limited.

“That’s going to be a real limiting factor across the country.”

Deck said the market is not likely to pick up in the first part of the year.

“Much of it depends on what happens at the national level,” she said. “Do we see some of the rescue packages start to work? Do we see the easy money that the Federal Reserve has put into the market start to work? Do we see an improvement in consumer confidence?

“All of those things will tell us whether or not we’ll start to see some things improve toward the end of 2009 or if it will take longer.”

Paul Bynum, owner of real estate marketing company Mountdata.com, also said the national economy is a major indicator of what will happen in Northwest Arkansas.

While the unemployment rate in Northwest Arkansas fell by 0.1 percent in October to 3.5 percent, the national unemployment rate climbed to 6.7 percent in November–.

“Unfortunately we’re tied to the national economy,” he said. “If the national economy goes south, we are going to go south too.”

Bynum said the market has been on the decline for the past four years and is going to take some time to turn around.

“It is going to turn around, but not next year,” he said. “It’s like a train, once it’s going 400 miles per hour, it doesn’t slow down to 60 miles per hour all of the sudden.

“The inertia keeps it moving, I don’t see the inertia of the economy slowing down until at least 2010,” Bynum said.

Deck said foreclosure filings are likely to continue at the same pace in 2009.

“Some folks who’ve been able to stave off bankruptcy or foreclosure will run out of liquidity,” she said. “We’re likely to continue to see some of the negative things we’ve seen this year, but I don’t see it accelerating.”

According to RealtyTrac, an Irvine Calif.-based company that compiles foreclosure data, there were 491 foreclosure filings in October in Benton County, or one in every 165 houses. That was 20 percent higher than in September and 72 percent higher than in October 2007.

In Washington County, there were 278 foreclosure filings in October, or one in every 287 houses. The October filings were 34 percent higher than September and 126 percent higher than in October 2007.
Deck said the increase in foreclosure filings is a result of the excess of new construction in the market, which according to the most recent data, is slowly being absorbed.

Data from the third-quarter residential Skyline Report, commissioned by Arvest Bank Group Inc. and compiled by Deck  at the CBER, showed that only 325 building permits were issued this quarter, down from 653 issued in the same period of 2007.

The number of unoccupied homes continued to decline with 1,343 units remaining in the market, a decline from 1,594 in the second quarter.

Todd White, senior vice president of Arvest Mortgage Co., said the latest Skyline report shows that the housing market is slowly improving.

“We are seeing the market start to absorb the new construction that is still out there for sale, it’s outpacing the number of new starts and I feel like that’s a positive direction for the market in Northwest Arkansas,” he said. “Combine that with the fact that long term fixed rates dropped dramatically this week, and I would expect that we would continue to see that absorption improve from here on out.”

White predicts the market will continue to improve in 2009.

“I don’t think that it will be a rapid improvement, but I think it will be a consistent, fairly stable improvement, picking up steam during the middle of the year,” he said. “Right now, we’re feeling a lot better about 2009 than we were a few months ago.”

Much of that has to do with mortgage rates, White said, which have fallen 1 percent in the past 30 days.

“That’s really spurred a lot of interest and activity in both purchases and refinances,” he said.

George Faucette, president of Coldwell Banker Faucette Real Estate of Fayetteville, said getting the inventory down will help the real estate market recover some in 2009.

“We have an inventory problem that’s led to a buyer confidence problem,” he said.
Faucette predicts the market will begin to improve by the second or third quarter, as inventory is pared down.

“We’ll slowly climb out of it,” he said. “2009 is not going to be a banner year for the real estate business, but I think we’ll start to see some correction in the marketplace.”

Phillip Taldo, principal broker and co-owner of Griffin Co. Realtors in Springdale, has a more positive outlook.

“I think it will be a year of opportunity in the real estate business,” he said.

Prices are low and interest rates are low, he said, referring to a Treasury Department plan to buy mortgage-backed securities in the hopes of driving rates as low as 4.5 percent, about 1 percent lower than current rates.

“When the economy settles down, I think everyone will look at real estate as the one thing that really stood up,” Taldo said. “It might have been the first indicator that there was a problem, but it has and will in the future, stand the test of time as a good investment.”