July sales of homes soar 19% in report

Arkansas home sales improved 19 percent in July, the biggest year-over-year gain in more than three years, the Arkansas Realtors Association said Tuesday.

There were 2,594 homes sold in the 43-county area surveyed by the Realtors Association, compared with 2,178 in July last year. The last time sales increased by such a wide margin was in April 2010, when sales rose 25 percent.

The gain in April 2010 was attributed to the federal home buyer tax credit, said Michael Pakko, chief economist at the Institute for Economic Advancement at the University of Arkansas at Little Rock.

“This is pretty firm confirmation that we’re seeing the long-awaited improvement in home sales,” Pakko said.

May, June and July are normally the busiest months for home sales, with July typically the best, Pakko said.

“Averaging June and July together this year, they were up 11.2 percent over [the same months] last year,” Pakko said. “That is a pretty good indication of how the peak summer months turned out.”

For the first seven months of the year, home sales are up almost 11 percent, which is a “very good measure of how good 2013 is turning out to be,” Pakko said.

“Prior to that it was pretty flat,” Pakko said.

It was the best July for home sales in the state since July 2007, which was before the recession that began in December 2007, Pakko said.

“For the past couple of years, I’ve been surprised that [the housing market] hasn’t shown much sign of recovery,” Pakko said. “I would have expected to see some improvement, at least in 2012.”

An improving economy has been a stimulus for home sales, said Kathy Deck, director of the Center for Business and Economic Research at the University of Arkansas at Fayetteville.

“[July] was just a really good time to buy a house,” Deck said.

Statewide, average sale prices rose more than 2 percent to about $167,400 compared with July last year.

There were 441 homes sold in Benton County in July, up more than 28 percent from July 2012, the association reported. Benton County Realtors sold three more homes than were sold in Pulaski County, which has about 150,000 more people than Benton County. It was the third month this year that Benton County has reported more home sales than Pulaski County, along with March and May.

“Benton County is on fire [in home sales] as well as from an employment perspective,” Deck said. “That just shows how important those two are together.”

Northwest Arkansas had an unemployment rate of 5.9 percent in July, the lowest among the state’s metropolitan areas. The area’s employment rate has been below 6 percent since July last year.

Pakko and Deck expect improving home sales to eventually spur an increase in home construction, which should help the state’s economy.

The improvement in home sales “bodes well for the construction industry,” Pakko said.

“Once we start seeing more home sales, we should start seeing a pickup in home construction,” Pakko said. “That is one of the holes we’ve had in the recovery to date.

Construction has been increasing in Northwest Arkansas, Deck said.

“From watching building permits, we’ve seen a substantial amount of building activity,” Deck said. “It’s enough that some people are already thinking, ‘Oh my goodness, are we getting overheated?’ I think it’s just a factor of the economic fundamentals and the fact that construction has been so muted for so long. This is a perfectly natural time to see construction activity picking up.”

It will be much more expensive to buy a house in forthcoming weeks because of rising mortgage rates, Deck said.

Interest rates for a 30-year mortgage are around 4.6 percent, Scott McElmurry, chief operating officer for Bank of Little Rock Mortgage, said. For a 15-year loan, interest rates are around 4 percent, he said.

Earlier this year, 30-year rates were around 3.25 percent and 15-year rates were about 2.5 percent. But interest rates are seldom a motivating factor, McElmurry said.

“It’s a good combination of a lot of things,” McElmurry said. “In previous years, you’ve had somewhat of a concern of possibly losing your job. Now consumer confidence is going up. And more commentators are talking about the market and the economy improving. It has shifted from pessimism to things are improving.”