LITTLE ROCK — Arkansas home sales were once again skewed in the latest figures because of the effects of a federal tax credit.
Sales dropped almost 27 percent in October, the Arkansas Realtors Association said Wednesday.
“Last October, we were at the end of the original first time homebuyers tax credit,” said Michael Pakko, chief economist at the Institute for Economic Advancement at the University of Arkansas at Little Rock. “That certainly [increased] home sales in October 2009.”
The deadline was extended eventually to April, and the tax credit was expanded to include existing homeowners.
Last month, 1,748 homes were sold in the 42 counties covered in the association’s report, down 26.8 percent from 2,387 homes sold in October last year. The report includes new and previously owned homes.
The percentage decline was high in many of the state’s most populous counties. Sales were down 48 percent in Lonoke County, 44 percent in Sebastian County, 35 percent in Pulaski County, 32 percent in Saline County, 26 percent in Washington County and 24 percent in Benton County.
The average home price was up about 5 percent statewide, including increases of 17 percent in Pulaski County and 12 percent in Benton County. The average home price in the state was about $144,700 in October.
Last year’s tax credit also skewed the comparison of home prices in October, Pakko said.
“Prices are higher than last year at this time because prices were depressed last year,” Pakko said. “First-time homebuyers tend to buy homes at the lower end of the market.”
Through October, home sales are down about 4 percent compared with the first 10 months of last year. The tax credit for first-time and existing homebuyers also skewed sales for the year, because the credit was available for the first five months this year, Pakko said.
Even with sales down, they are better than expected, said Scott McElmurry, chief operating officer of Bank of Little Rock Mortgage.
“We’re incredibly busy, as I’m sure every other mortgage company is,” McElmurry said. “Probably 60 [percent] to 40 [percent] of our business is refinancing. But there have been a good amount of purchases, which is encouraging because of the [typically slow] time of the year.”
Currently, a 30-year fixed rate mortgage is available to qualified borrowers at 4.25 percent and a 15-year rate is available at about 3.75 percent, McElmurry said.
It is difficult to project when home sales will recover, Pakko said.
“But given the relatively positive outlook for our state, we’ll probably see home sales pick up slowly after the winter months if the fundamentals are good and we still have low mortgage rates,” Pakko said.
Nationally, new-home sales tumbled in October while the median home price dropped to the lowest point in seven years.
Sales of new single-family homes declined 8.1 percent to a seasonally adjusted annual rate of 283,000 units in October, the Commerce Department reported Wednesday.
It was the fourth time the sales rate has dropped in the past six months. New-home sales are just 2.9 percent above August’s pace of 275,000 units- the lowest level on records dating back to 1963.
Many economists believe it could take three years for the industry to get back to a healthy annual rate of sales of about 600,000 homes.
The median price of a home sold in the U.S. in October dipped to $194,900, the lowest level since October 2003.
Some analysts downplayed the drop in sales, saying that when the market is this low it is vulnerable to high volatility.
“Sales are bumping along the bottom, showing no real inclination to start recovering or, thankfully, to fall any further,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics.
Information for this article was contributed by Martin Crutsinger of The Associated Press.
Business, Pages 35 on 11/25/2010