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

One question we get quite a bit at the Arkansas Realtors Association (ARA) concerns future market conditions.

The National Association of Realtors (NAR) expects the sales of existing homes to improve and that’s good news for homeowners around the country who would like to sell their houses and buy new ones. However, we’re not in the crystal ball business at the ARA, so we tend to defer to the NAR when it comes to predicting what might happen to markets in the future.

Frankly, 2008 was a year full of bad news about national housing markets, but things started to take a turn for the better around the end of November. I’ll touch on that in a minute, but it seems pretty clear that a lot of the news about the national housing markets didn’t apply to the Jonesboro area.

While sales were dropping to alarming levels around the country, markets in Jonesboro remained strong. From Jan. 1 through Dec. 15, 942 new and existing homes were sold in Craighead County – a decline of 7.4 percent from 1,017 houses sold in the same time period in 2007.

Meanwhile, home values increased in the Jonesboro area. The average sale price through Dec. 15 was $138,123, an increase of 1.6 percent over $135,943 in 2007. The median sales price through Dec. 15 was $120,000, up 1.7 percent from $118,000 in 2007.

Furthermore, inventory – the number of homes for sale – has remained at between 600 and 700 units in Craighead County all year long.

In other words, the market in the Jonesboro area has remained strong throughout the year and has been one of the most consistent markets in the state.

The federal government, in November, started announcing plans that should boost housing markets throughout the nation. It’s not a stretch, then, to suggest the market in Jonesboro will benefit from those plans, too.

The day after Thanksgiving, the Federal Reserve announced the decision to purchase $500 billion in mortgage backed securities held by Fannie Mae and Freddie Mac. Right after that announcement, investors flocked toward those mortgage backed securities and mortgage rates dropped as a result.

Here’s how that worked. Mortgage rates are tied directly to the yield on mortgage backed securities. As more people invest in mortgage backed securities, the yields decrease and interest rates drop accordingly.

Mortgage rates dropped to around 5.25 percent as a result of the heightened interest in those securities. That rate was the lowest we’ve seen since the summer of 2003 and that was a 40-year low. The downward pressure on mortgage rates has increased.

In the middle of December, the federal government was looking at ways to push down mortgage rates even more. It appears, then, that lower interest rates will be with us in 2009 and that will certainly strengthen markets.

According to the NAR, a 1 percent decrease in interest rates paves the way for the sale of 500,000 additional homes across the nation. Lower interest rates, then, benefit both buyers and sellers.

On Dec. 16, Internal Revenue Service Commissioner Doug Shulman announced a plan to help homeowners. Shulman, during a telephone conference, said federal tax liens have been a stumbling block to people wanting to refinance their homes or sell them.

He said the IRS is hoping to remove that stumbling block. Under an existing program, the IRS will make some liens secondary to mortgages for people refinancing their homes or discharge liens for people wanting to sell their homes.

Shulman pointed out it’s next to impossible to refinance a mortgage or sell a home if there’s a federal tax lien against the property. He said the IRS has had the program in place to make it easier for people wanting to sell or refinance property, but has decided to emphasize the program and speed it up for people needing to deal with a tax lien promptly.

Shulman pointed out that discharging a lien doesn’t mean the person owing the debt is excused from paying it. The lien still attaches to other property and wages. However, the home can be transferred free and clear of the lien with IRS approval.

One of the reasons it’s difficult to predict exactly what will happen in housing markets around the nation is that the government is taking unprecedented actions to make life easier for both homeowners and prospective buyers.
In Jonesboro, the market was strong throughout 2008 and may well improve due to government action.