story by Kim Souza
ksouza@thecitywire.com
Homeowners who purchased property near downtown Bentonville at the market peak have likely seen strong equity gains since 2006, but that is not the case for other areas across the region.
In fact, 11% of the mortgages in Benton County remain underwater – the combined mortgage securing the property is at least 25% higher than the estimated market value – at the end of 2014, despite the 10.5% gain in median home prices (per square foot) since 2012, according to Irvine, Calif.-based RealtyTrac.com.
RealtyTrac found that 12% of Washington County homeowners are underwater. MountData.com found median home prices in Washington County have risen 8.24% since 2012.
While the Northwest Arkansas real estate market prices reached a peak in the fall of 2006, the unraveling lasted for several years as supply outpaced demand amid the deep and lingering recession of 2008.
The RealtyTrac report found 13% of homes in Arkansas were also classified as “seriously underwater,” which was the same percentage at the national level.
“Median home prices nationwide bottomed out in March 2012 and since then have increased 35% lifting 5.8 million homeowners out of seriously underwater territory,” said Daren Blomquist, vice president at RealtyTrac. “While the remaining seriously underwater properties continue to be a millstone around the neck of some local markets, the growing number of equity rich homeowners should help counteract the downward pull of negative equity in many markets, empowering those housing markets — and by extension their local economies — to walk on water in 2015.”
Peak to trough local real estate prices an average per-square-foot basis fell roughly 30% between the back half of 2006 and the first half of 2011, according to Kathy Deck, director for the Center for Business and Economic Research at the University of Arkansas. Given the steady recovery of the past two to three years, Deck said much of the loss has been recouped.
COUNTY NUMBERS
Benton County (Average Price Per Square Foot)
October 2006: $97.05
March 2011: $68.11
October 2014: $89.61
Washington County (Average Price Per Square Foot)
October 2006: $101.67
March 2011: $70.14
October 2014: $89.30
Average prices in Benton County have recovered about 24% of the 30% lost during the peak-to-trough period. In Washington County, 27% of the market loss has been recovered.
Deck said historically 5% annual returns were the norm, but given the lower interest rate environment post recession, her forecast for local real estate price appreciation is more like 2.5% to 3% this year and next. She said the local market is healthy in that supply is in sync with demand and that will help ensure more stable pricing going forward.
UNEVEN RECOVERY
Austin Bivens, an agent with Keller Williams Market Pro Fayetteville, said the local real estate market recovery has been strong in some areas, particularly in west Springdale and Southwest Rogers while the central and eastern parts of the two cities have seen prices lag.
“You can almost follow the new sewer trails to the areas of newest growth and in some of those neighborhoods— Lexington and Cross Creek in southwest Rogers — prices are strong. If a buyer bought right in 2008 they would likely be in an equity position to sell today,” Bivens said.
Other areas have not been so fortunate. He said lengthening days on market and price reductions seen in some neighborhoods are indications that price appreciation just isn’t there. Bivens said Bella Vista and other outlying areas like Pea Ridge and Prairie Grove have been laggards in the rebound, noting that Bella Vista is returning to a niche market now that more affordable homes are being built inside the four larger cities.
RealtyTrac said 23% of the homeowners in Northwest Arkansas are seeing their equity resurface.
Vicki Briolat, an agent with Crye-Leike in Bentonville, is seeing buyers who had been underwater for a long time get back to the point where they can entertain the possibilities of resale. She said homes in west Bentonville or in Centerton near the new Bentonville West High School have come up in value and new homes under construction are selling well. She just closed a $550,000 cash sale in the Versailles subdivision and has another home under contract.
She said the recovery varies across the neighborhoods but even the homes located out near Cave Springs when the market tanked are returning to positive equity levels.