Arkansas Economic Development Institute

Arkansas House Prices – 2011:Q1

By , May 25, 2011 4:52 PM

The latest house price data from the Federal Housing Finance Agency (FHFA) shows that average house prices in Arkansas continued to decline in the first quarter of 2011.  The FHFA “All Transactions Indexes,” which incorporate house price information from both home sales and refinancings, showed an average decline for Arkansas of 1.6% in the first quarter of the year.  Over the last four quarters, the average value has fallen about 1.9%.  These decreases are smaller than the national average:  In the first quarter, average prices for the U.S. as a whole fell 2.7%, and are down 3.1% over the past  four quarters.

Source:  Federal Housing Finance Agency

Source: Federal Housing Finance Agency

The statewide average conceals some stark differences among regions of the state.  As shown in the figure below, house prices in the Fayetteville-Springdale-Rogers metro area have followed a pattern very close to the U.S. average.  Over the past four quarters, prices in Fayetteville are down 4%, and have fallen by 14% over the past five years.  In contrast, house prices in central Arkansas are down only 1.1% compared to a year earlier, and are about 4% higher than five years ago.

Source:  Federal Housing Finance Agency

Source: Federal Housing Finance Agency

The state’s smaller metro areas have generally fared better than the statewide average as well.  In the first quarter, prices increased in Texarkana and Jonesboro. Both of these metro areas have generally seen modest but steady price increases throughout the “boom and bust” cycle experienced in most parts of the country.   House prices in Hot Springs and Pine Bluff had been rising steadily during the early stages of the housing downturn, but have turned sharply negative in recent quarters.  Prices in Fort Smith have also fallen over the past two years, but not as dramatically as in Hot Springs and Pine Bluff.

Source:  Federal Housing Finance Agency

Source: Federal Housing Finance Agency

A longer-term perspective reveals the stark differences among Arkansas metro areas.  House prices in five of the state’s metro areas are higher than they were at the beginning of 2006.  Recent declines in Pine Bluff have lowered prices to about the same level as in 2006, while prices in northwest Arkansas are down by 14%–more than the national average decline of 11.8%. 

It should be noted that even the relatively large price declines in the Fayetteville-Springdale-Rogers metro area pale in comparison to some of the more severly impacted regions of the country.  Over the five year period from 2006:Q1 to 2011:Q1, house prices in California are down by nearly 35%, price declines in Florida and Arizona are close to 40%, and house prices in Nevada have fallen by nearly half: -48.9%.

Arkansas Employment and Unemployment – April 2011

By , May 20, 2011 12:12 PM

The latest reports on conditions in Arkansas labor markets confirm the trend of slow but steady improvement.  According to data from the Bureau of Labor Statistics and the Arkansas Department of Workforce Services, the unemployment rate in March was revised downward by 0.1% to 7.7%, and remained at that level in April.  The underlying data from the household survey showed a decline in the labor force and the number of employed persons in April, representing breaks in what had been generally upward trends in those series.  More important, however, the data also showed a decline in the number of unemployed — down 341 from the previous month.  So far in 2011, the number of unemployed in Arkansas has fallen by over 1,400.

Source:  Bureau of Labor Statistics

Source: Bureau of Labor Statistics

The survey of employers showed an accelerating pace of employment growth.  The total for March was revised upward by 2,000 jobs and payrolls expanded by an additional 4,800 in April (seasonally adjusted).  Over the first four months of the year, employers have added over 12,000 jobs to their payrolls.  And since the trough of February 2010, employment has increased by 31,400.  This 16-month expansion represents a milestone of sorts:  Over half of the total jobs lost between the start of the recession and February 2010 have now been recovered.  By comparison, employment nationwide has risen by 1.8 million, only about 20% of the total number of jobs lost from the start of the recession.

Source:  Bureau of Labor Statistics

Source: Bureau of Labor Statistics

Employment in construction continues to languish, declining by another 900 jobs in April (seasonally adjusted).  Over the past 12 months, construction employment is down by 2,600.  Manufacturing employment increased by 1,200 in April, but is still below the level of a year ago.  Service-providing jobs rose in every major sector in April, with the exception of “Other Services.”   Gains were particularly strong in Leisure and Hospitality; Professional and Business Services; and Trade, Transportation and Utilities. 

Source:  Bureau of Labor Statistics

Source: Bureau of Labor Statistics

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*Seasonally adjusted data for nonfarm payroll employment, reported in a format compatible with the monthly press release from the Arkansas Department of Workforce Services, are available hereTable – Seasonally Adjusted NFPE

Arkansas Home Sales — 2011:Q1

By , May 12, 2011 3:32 PM

The latest monthly home sales figures from the Arkansas Realtors® Association (ARA) have appeared to be rather volatile.  Compared to the previous year, sales were up 13% in January, down 6% in February, then down 15% in March.   These swings prompted Amy Glover Bryant, Director of Communications for the ARA, to characterize the market as “something of a roller coaster ride.”  Interpreting the data are complicated  by seasonal patterns and the delayed effects of the home-buyer tax credits in 2009 and 2010.

Home sales follow a recurring seaonal pattern, with sales strong during the summer months and slow during the winter.  Consequently, month-to-month comparisons of raw sales data are dominated by seasonal effects, with little information about business cycle fluctuations or longer term trends.  The appropriate measure for tracking such data is the year-over-year comparison that has recently yeilded such variable readings.   To properly interpret year-over-year data, however, it is necessary to keep track of special factors that were influencing the market 12 months ago.  For several months now, the Federal government’s home-buyer tax credit programs have been relevant for that evaluation.

As shown in the figure below, year-to-year changes for January, February and March of 2011 are guaged against sales figure for 2010 that lie between the tax-credit expiration dates of November 2009 and April 2010.  January is typically the slowest sales month of the year, and last year it was also effected by the slowdown that immediately followed the November 2009 tax credit expiration.  Sales began to pick up in February and March as the second tax-credit program ramped up toward a peak in April.  These developments have effected year-over-year comparisons just as much (if not more than) the sales figures for 2011. 

Source:  Arkansas Realtors® Association

Source: Arkansas Realtors® Association

Another way to disentangle the seasonal fluctuations from underlying cycles and trends is to use statistical methods to “seasonally adjust” the data.  The transformed, seasonally-adjusted data provide an estimate of the sales pace for each month under the counterfactual assumption that home sales are distributed evenly throughout the year.   After the purely seasonal components are removed, it is legitimate to make month-to-month comparisons, or to compare different points throughout the year.  The figure below shows the Arkansas home sales data, after seasonal adjustment. 

Source:  Arkansas Realtors® Association.  (Seasonally adjusted by the Institute for Economic Advancement.)

Source: Arkansas Realtors® Association. (Seasonally adjusted by the Institute for Economic Advancement.)

After seasonal adjustment, the two sales peaks associated with the end-dates of the home-buyers’ tax credits are clear.  Each peak is followed by a sharp drop in sales.  Since the expiration of the second program last year, sales languished — but have begun to recover, slowly.

In addition to the monthly data from the ARA, the National Association of Realtors® (NAR) publishes quarterly, seasonally-adjusted sales figures for each state.  The methodologies for collecting and processing the data differ between these two sources, so it is interesting to compare their implications.  The figure below presents such a comparison, with each series normalized to equal 100 at the start of 2009.  Both series show the sales peaks associated with the home buyers’ tax credits, and both indicate a slow, uneven recovery since the drop-off in 2010:Q3.  The NAR data show a slight increase in 2011:Q1 compared to the previous quarter, while the ARA data show a slight decrease. 

 

Sources:  National Association of Realtors®, Arkansas Realtors® Association, Institute for Economic Advancement.

Sources: National Association of Realtors®, Arkansas Realtors® Association, Institute for Economic Advancement.

The trends are not clear enough to make any unambiguous projections.   But when it comes to the monthly data releases from the ARA, April 2011 is almost certain to  represent a sharp decline from the previous year.  Similarly, July 2011 (typically the highest sales month of the year) is almost certain to be higher than July 2010.  When those figures are released, however, it will say more about what happened in 2010 than what is happening today.

Arkansas Taxable Sales Up 0.7% in 2011:Q1

By , May 5, 2011 8:00 AM

Preliminary figures indicate that Arkansas Taxable Sales rose slightly in the first quarter of 2011, up 0.7% from the previous quarter.   Following sluggish growth in the third quarter of 2010 and a decline in the fourth quarter, the most recent data show that sales have been essentially flat since the middle of last year. 

Sources:  Department of Finance and Administration; Institute for Economic Advancement.

Sources: Department of Finance and Administration; Institute for Economic Advancement.

Raw monthly data from the Department of Finance and Administration (DFA) show that recent sales tax collections have been above the levels of the previous year, and totals for the fiscal year-to-date have been running close to official forecasts.  But recent monthly figures have been less than robust, coming in below forecast. 

As shown in the figure below, Arkansas Taxable Sales had risen sharply during the first half of 2010, but slowed in the latter part of the year.  The sharp decline in December prompted speculation in a previous post as to whether unusual holiday spending patterns might be to blame.  Sales during the first three months of 2011 have rebounded somewhat, but remain below the peak levels of mid-2010.

Sources:  Department of Finance and Administration; Institute for Economic Advancement.

Sources: Department of Finance and Administration; Institute for Economic Advancement.

The sluggish figures for the first three months of 2011 suggest that the weakness in December sales was not an anomaly.  However, there is one important factor to consider in interpreting recent data:  Gasoline is not subject to sales and use taxes in Arkansas, so it is not included in the Arkansas Taxable Sales figures.  Data from AAA shows that  gasoline prices in Arkansas rose by more than 40% between September 1, 2010 and April 1, 2011.  Even with slowing demand due to conservation responses, that rate of price increase suggests that people have been devoting a larger share of their total spending to fuel consumption, and a smaller share to other categories that are included in Arkansas Taxable Sales.  This factor is likely to continue to restrain Arkansas Taxable Sales growth in coming months.

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The Arkansas Taxable Sales series is calculated by the Institute for Economic Advancement to serve as a timely measure of Arkansas retail sales.  The series is derived from sales and use tax data from DFA, adjusting for the relative timing of tax collections and underlying sales, changes in tax laws, and seasonal patterns in the data.

A spreadsheet of the data is available here:  Arkansas Taxable Sales data (Excel file)

* Data are preliminary until the release of the DFA report, Arkansas Fiscal Notes for April 2011, and will be updated when information becomes available.

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