real estate review
By Ethan C. Nobles, director of media relations for Arkansas Realtors Association

Kathy Deck is one of those economists with the ability to break things down so that most anyone can understand just what factors are behind the performance of various economic indicators.

As everyone has been reminded time and time again, the residential housing market is a key economic indicator. That market has been struggling nationally over the past couple of years and, thus, economists have taken a hard look at homes sales and what they mean to the overall economy.

Deck, director of the Center for Business and Economic Research at the University of Arkansas, said the reason homes sales have been slumping is simple – when homes appreciate in value dramatically while incomes don’t rise as quickly, you get a market correction.

In other words, you can almost always expect prices to come down after they’ve shot up dramatically. That disparity between income and home prices is one of the key factors in the current correction, and Deck said most markets around the nation can expect to see home prices continue to fall until equilibrium is reached. She was quick to point out that Arkansas hasn’t been as hard hit as the rest of the nation, although some markets are certainly going through a correction. Home sales in northwest Arkansas have slowed down considerably this year, but that only stands to reason because there were a few years when double-digit increases in average sale prices were not uncommon.

The market in Jonesboro, however, has remained relatively stable throughout the past couple of years. There’s no denying that sales are down, but average prices for existing homes has declined only slightly, while median prices for both new and existing houses is level when compared with last year. Furthermore, inventories have remained consistent in the Jonesboro area.

When you see the number of homes for sale increase consistently, there is some cause for alarm. However, inventory levels in the Jonesboro area have fluctuated between roughly 650 and 700 homes for sale all year long.

A breakdown of the Jonesboro market is attached, so we won’t dwell too much on the numbers here. At this point, a question worth digging into a bit is this – why has the Jonesboro market remained stable over the past year?

For one thing, the Jonesboro market didn’t go through the extreme increases that were present in some parts of the nation during the years when the housing market was booming. Rather, the Jonesboro housing market exhibited slow, steady growth.

The radical growth that Deck said always devolves into a market correction, then, just didn’t take place in Jonesboro. The end result, of course, is that there isn’t much of a correction when prices don’t accelerate to a level that freezes a lot of people out of the housing market.

Ken Helman, president of the Jonesboro Board of Realtors, said there’s another factor to consider – the area economy is diverse and has continued to expand throughout the past couple of years. Considering the types of industries that are in Jonesboro, Helman may have hit the nail on the head there.

In addition to the obvious economic benefits that come with Arkansas State University, Jonesboro has evolved as a town that has thrived due to the arrival of the food processing industry. Additionally, Jonesboro has emerged as a regional center for banking and medical care and continues to reap the benefits of the expansion of those industries.

Helman said the most noticeable shift in the housing market is that homes might sell a little slower than they used to and there are times when buyers have more choices, but that’s ultimately a good situation. If sellers do price their homes in line with fair market value, they will still find buyers within a reasonable amount of time.

Buyers stand to reap the benefit of the current market regardless of where they are. Sellers are becoming more reasonable in pricing their homes and that’s a reversal from a few years ago when buyers often found themselves competing with each other to purchase houses.

There may be a market correction going on in Jonesboro, but it’s slight compared with the rest of the nation due to a strong economy and housing prices that appreciated gradually during a time when home values were skyrocketing beyond what buyers were willing to pay.