story by Kim Souza
ksouza@thecitywire.com
Editor’s note: This story is a component of The Compass Report. The quarterly Compass Report is managed by The City Wire, and sponsored by Arvest Bank. Supporting sponsors of The Compass Report are Cox Communications and the Fort Smith Regional Chamber of Commerce.
The residential real estate sector in Fort Smith and the surrounding area is known across the state as a mature, no-hype market. But 2014 proved to be a breakout year for the Sebastian and Crawford counties with a 14.3% rise in home sales. Residential sales were up 9.4% in Sebastian County and 31.3% in Crawford.
Total sales in Sebastian County reached $184.34 million with 1,360 homes sold last year, according to Paul Bynum, analyst with MountData.com. Unit sales rose 10.74% while average prices dipped to $114,000, compared to $115,000 reported in 2013.
Kevin King, owner of Weichert King Realty Group, said his Fort Smith firm posted a banner year with transactions increasing 22% from the year-ago period.
“Our sales volume was up 22% in 2014 and the agent average for the office was 15 sales. That’s not bad for a growing office. We are back to 2005 sales levels, just before the bubble began to inflate,” King said.
He said the sales levels posted in 2014 are comfortable and sustainable, noting that there is some new growth and investment taking place around the city.
MountData reports agents across Fort Smith sold 96 homes in December with a combined value of $11.88 million. This compared to 96 sales worth $12.7 million in the same month of 2013. 
King said home prices are flat to down slightly from a year ago, because there is still investor activity in the market, especially at the low price end.
“Investors do not have the emotional attachment to the properties and they tend to bid lower and walk away rather than bid up to get a property that will turn into a rental,” King said.
Sebastian County’s median home price per square foot in 2014 was $68.50, just 50 cents lower than in 2013, and $1.20 less than reported in 2012.
Clif Warnock, broker with Warnock Real Estate, recently said there were more higher prices homes sold throughout the fall months which had pushed up the average sales prices from 2013.
“Over the past several years we might have an average of 2 to 3 properties sell at prices between $800,000 and $1 million. We recently closed four of those transactions and six have been sold this year,” Warnock said.
CRAWFORD COUNTY
Crawford County agents sold 635 homes worth $75.114 million last year. Unit sales climbed 22.8%, while total volume rose 31.13% year-over-year, according to MountData.com.
Warnock said the Crawford County market provides a 15% value in prices over neighboring Fort Smith, which keeps activity steady.
“One big advantage for buyers in Crawford County is that they can still get the Rural Development loans which provide 100% financing. When that is added to the 15% pricing values and the low interest rates it’s easy to see why first time buyers and others moving to Fort Smith would consider the Van Buren market,” Warnock said.
Crawford County agents had a big month in December with 53 sales tallying $6.034 million combined. Unit sales rose 20% while volume jumped 38% over the same month in 2013.
For the year, the median sales price in Crawford County was $67.70 per square foot, up from $67.10 in the prior year. The median square-foot price is 80 cents cheaper than in Sebastian County and $20.3 cheaper than in neighboring Washington County, according to MountData.com
2015 OUTLOOK
Warnock and King expect 2015 sales to be similar, growing slightly in volume and units as consumer confidence is up and unemployment is down.
King said the reduction in mortgage insurance premiums is timely to help offset what is expected to be higher interest rates by the end of 2015.
“Three predictions I have heard recently is that interest rates will be 5% by the end of 2015, (with) most of that move coming in the back half of this year,” King said.
While 5% is historically a low mortgage rate, it is considerably higher than 3.5% to 4% rates now available.
Recent changes in the Federal Housing Administration’s mortgage insurance premium rates is seen as a help to homeowners who will secure FHA loans after Jan. 26. This is the first reduction after several increases that followed the housing bubble crash. For the majority of buyers, the rate will reduce from 1.35% of the loan amount to 0.85%, a pretty hefty reduction. The upfront mortgage insurance premium, however, remains unchanged at 1.75%.
For FHA backed mortgage loans, buyers pay the upfront mortgage insurance premium at closing, plus an annual mortgage insurance premium that is spread out through monthly mortgage payments.
Using the median home prices at the end of 2014, The City Wire calculated the monthly savings created from the rate reduction.
Sebastian County has a median home price of $114,000. With a 3.5% downpayment the mortgage amount would be $110,010. Under the 1.35% rate the annual premium is $1,485, or $123.76 per month.
Under the new 0.85% rate, the annual premium would be $935 or $77.92 per month, a savings of $45.93 per month.
In Crawford County with a median price of $109,700 the annual premium goes from $1,429 to $899.81 for a monthly savings of $44.
King said the majority of home loans made in Fort Smith are conventional, and not FHA, but when FHA is used the new rate will help borrowers’ dollars go further. In Crawford County there is still wide use of the 100% Rural Development loans, but FHA is also a common option for buyers with less-than-perfect credit scores.
FORECLOSURE WRAP
There were 86 properties in Crawford County that had foreclosure filings made against them in 2014. Foreclosure filings fell 48.4% from 2013 and they were down 11.34% from 2012, according to Irvine, Calif.,-based RealtyTrac.
There were 120 properties in Sebastian County with foreclosure filings. The pace was slashed in half from 2013 as filings were down 54.3%. This came on top of a 25.5% drop in 2012.
King said the Fort Smith market tends to lag about six months to one year behind the nation in foreclosures.
“We still have a few of them working their they way through but the amount grows smaller each year. With unemployment much lower today I don’t expect to see foreclosures as a threat in the Fort Smith market,” King said.
HOME SALES SUMMARY
Crawford County
Unit Sales
2014: 635
2013: 417
2012: 502
Sales Volume
2014: $75.114 million
2013: $57.193 million
2012: $60.179 million
Median Sales Price
2014: $109,700
2013: $105,000
2012: $112,500
Sebastian County
Unit Sales
2014: 1,360
2013: 1,228
2012: 1,114
Sales Volume
2014: $184.340 million
2013: $168.436 million
2012: $153.011 million
Median Sales Price
2014: $114,000
2013: $115,000
2012: $117,000