Home Prices in 2009

By , February 26, 2010 11:45 AM

Data covering the end of 2009 continue to roll in.  This week, we received new information about home prices from two independent sources. 

First, the  celebrated S&P/Case-Shiller index was released on February 23,  showing that home prices nationwide were up 1.1 percent in the fourth quarter (seasonally adjusted), following a 3.3 percent decline in the third quarter.  Over the past four quarters, the Case-Shiller nationwide index registered a decline of 2.5 percent. 

While the Case-Shiller index is a good measure of home values nationwide and particularly in the nation’s largest metropolitan areas, its component indices contain no specific information about Arkansas.  An alternative is the similarly-constructed set of house price indices produced by the Federal Housing Finance Agency (FHFA).  The latest set of estimates from this source was released yesterday (February 25).  The FHFA’s purchase-only index (comparable Case-Shiller) showed that  house prices nationwide were basically flat in the second half of 2009 (up 0.1 percent in the third quarter and down 0.1 percent in the fourth).  For the year, this measure showed house prices down 1.2 percent.

For Arkansas, the FHFA sales only index showed an increase of 0.5 percent in the fourth quarter, and realtive to a year earlier, house prices were up by 1.5 percent.  As shown in the chart below, this continues a clear pattern: During the period of rapid price appreciation in the first half of the decade, Arkansas home prices grew more slowly than the nationwide average.  Since 2007,  price changes in Arkansas have been similarly muted — we haven’t seen the sharp declines that have been evident in other parts of the country. 

FHFA Purchase-Only Indices

Source: Federal Housing Finance Agency

The FHFA also produces an alternative “all-transactions” index that includes appraisals from refinancings in addition to sales-price data.  By this measure, house prices have recently shown more weakness, with prices down 1.9 percent in Arkansas and down 4.7 percent nationwide (from 2008Q4 to 2009Q4).   Note that Arkansas home prices have remained more stable than those in the rest of the country, using either measure.

Whether the purchase-only or all-transactions index is a better measure of home values in general is an open question.  [See Comment:  Differences Among Home-Price Indices]  But by adding data observations from refinancing appraisals, the FHFA is able to construct indexes for smaller geographic areas, including all of the nations Metropolitan Statistical Areas (MSAs).  The table below shows how  home prices in Arkansas’ MSAs fared during 2009, in comparison to recent years.

Source:  Federal Housing Finance Authority

Source: Federal Housing Finance Agency

Home prices fell in most of Arkansas MSAs in 2009, but the declines were generally smaller than the U.S. average.  The only exception was in the Northwest Arkansas, where prices have followed a pattern similar to the nationwide average over the past few years.  Home prices were also down sharply in Hot Springs in 2009, but that figure represents the first annual decline after a series of fairly large increases.  Falling house prices in Little Rock and Pine Bluff also represented the first annual declines in the past five years.   Jonesboro and Texarkana both experienced modest house-price increases in 2009, and the data show continued strong appreciation in Fort Smith.

In some metro areas around the country–including many of those included in the Case-Shiller index–home prices have fallen sharply over the past two to three years following a period of exorbitant price increases.  The FHFA data show considerably more stability in Arkansas, with price declines in 2009 representing only a modest departure from the trend of steady appreciation over time.

Arkansas Home Sales: Steady Recovery During 2009

By , February 22, 2010 8:04 PM

As described in a previous article on Arkansas Economist, realtors’ associations provide  two independent measure of Arkansas home sales.  The National Association of Realtors® (NAR) conducts nationwide surveys to estimate total U.S. home sales, and provides quarterly estimates of sales at the state level.  Locally, the Arkansas Realtors® Association (ARA) publishes monthly totals of Homes Sold in Arkansas by Realtors®, which represents a compilation of data from participating multiple listing services around the state. 

Despite their differing methodology and coverage, the two sources of information about the Arkansas real estate market reveal the same pattern:  Sales volumes declined steadily during 2007 and 2008, reaching a low point in the fourth quarter of 2008.  During 2009, however, sales showed steady improvement.

The chart below illustrates these patterns.  It shows both the NAR and ARA measures of home sales  expressed in directly comparable forms — as indexes normalized to equal one in 2007.*  The chart shows that in sales in the fourth quarter of 2008 had fallen by nearly one-third from the average volume of 2007.  After steady increases during 2009 (seasonally adjusted), sales in the fourth quarter of 2009 were back up to well over 80 percent of their 2007 pace.

The outlook for Arkansas’ housing market is generally good.  There may be brief sales downturns associated with the expiration of home-buyer tax incentives later this year and with inevitable increases in mortgage rates as economic expansion picks up pace.  Nevertheless, the steady increase in sales during 2009 suggests that the residential real estate market in Arkansas is well on its way to recovery.  


Sources: National Association of Realtors®, Arkansas Realtors® Association, Moody's Economy.com, Institute for Economic Advancement.

*The NAR measure is published quarterly on a seasonally adjusted basis.  The specific measure used in the chart is Existing Single-Family Home Sales, as reported by Moody’s Economy.com. The ARA measure is published monthly and is not seasonally adjusted.  To construct the chart, ARA data were seasonally adjusted using the method described in a previous post, then averaged over quarters.   Raw data and monthly reports for Homes Sold in Arkansas by Realtors® is available at the Arkansas Realtors® Association blog, The Arkansas Realtor®.

Metro Area Employment & Unemployment – 2009

By , February 11, 2010 12:50 PM

Last week, the Bureau of Labor Statistics (BLS) announced its estimates for employment and unemployment in the nation’s Metropolitan Statistical Areas (MSAs) for December 2009. 

Unemployment rates for Arkansas MSAs were changed little from the previous month (seasonally adjusted).   As shown in the table below, the unemployment rate declined slightly in Fort Smith, rose slightly in Little Rock and Texarkana, and was unchanged in the state’s other MSAs.

Sources:  Bureau of Labor Statistics, Institute for Economic Advancement.

Sources: Bureau of Labor Statistics, Institute for Economic Advancement.

Compared to a year earlier, unemployment rates across the state were up sharply, with increases ranging from 1.1 percentage points (Fayetteville) to 1.9 percentage points (Fort Smith).

The December payroll employment statistics–compiled from a separate suvey–indicate a similar pattern.  From the previous month, job losses were recorded in all MSAs except Fort Smith (where employment was unchanged).  Over the last six months of 2009, employment declines ranged from 0.1 percent (Fort Smith and Texarkana) to 3.7 percent (Hot Springs).

Sources:  Bureau of Labor Statistics, Institute for Economic Advancement.

Sources: Bureau of Labor Statistics, Institute for Economic Advancement.

The next BLS release of payroll employment data will incorporate annual benchmark revisions.  As described in a previous article, these revisions are expected to show sharper job losses during the second quarter of 2009 than shown in the current data.  The table below illustrates the expected magnitude of the downward revisions for Arkansas’ MSAs, expressed as cumulative employment declines since the onset of the recession in December 2007.

Sources:  Bureau of Labor Statistics, Institute for Economic Advancement.

Sources: Bureau of Labor Statistics, Institute for Economic Advancement.

For most of Arkansas’ MSAs, the revisions are expected to be substantial.  Larger job losses are likely to be recorded for all MSAs except Pine Bluff, and in many cases the revised employment declines will be more than twice as large as the currently published statistics suggest.    In some sense, the data revisions reflect “old news:” the changes primarily reflect the evaluation of labor market conditions in the spring of 2009.  Nevertheless, the new data will change our perspective on where we presently stand and will have implications for the employment outlook in Arkansas’ MSAs as the economic recovery proceeds.

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