Arkansas Housing Market 2023 Report
What is the Arkansas Housing Market Like?
While the housing market nationwide has been making the headlines as property prices reached new heights in the wake of the COVID-19 pandemic, the Arkansas housing market is one of the few that remains relatively affordable despite significant growth. Like most other states, Arkansas home prices have been consistently climbing since the Great Depression, and the past two years have been marked by accelerated growth. Nevertheless, the median Arkansas home still remains well below the national average, making the Southern state one of the few places where buying is more affordable than renting.
According to data collected in October 2022, the latest available at the time of writing, the median Arkansas sale price has climbed to $251,800, still showing a double-digit growth at 12.4% compared to its October 2021 level. The median number of days on the market is declining, standing at 32 in October 2022 compared to 43 the year prior. In addition, the Arkansas housing market remains competitive, with 24.1% of listed homes selling above the listing price. The housing inventory continues to be in short supply, with a mere two months of inventory on the market, an improvement from 1 month in October.
Nevertheless, the sharp increase in mortgage rates following the aggressive monetary policy initiated by the Federal Reserve Bank to curb down inflation is taking a toll on the Arkansas housing market. The volume of real estate transactions has declined significantly as house hunters must contend with the combination of high property prices and high interest rates, which affects their buying e were 2,381 houses sold in October 2022 in the entire state, 24.6% less than the year prior.
How does the Arkansas Housing Market Compare to the National Housing Market?
The Arkansas housing follows similar trends to the ones we have observed nationwide. After a period of rapid growth due to the combination of high demand for housing, interest rates at historic lows, and an extremely limited inventory during the COVID-19 pandemic, the Arkansas housing market is starting to cool down.
Nevertheless, unlike other states with higher property prices, Arkansas home prices remain significantly more affordable than the national average and continue to attract new buyers, including those from out of state. There were about 1000 more new residents seeking to buy a house in Arkansas between September 2022 and November 2022 than locals trying to leave the state, leading to a continuous shortage of inventory that is keeping property prices relatively high. Unlike more expensive states where home prices have significantly slowed down or are starting to decline, Arkansas housing prices are still increasing in the double-digit, although at a more moderate pace than in months prior.
As of December 2022, the 30-year mortgage rates are hovering around 7% following the Fed’s interest rate hiking policy. After years of standing near historic lows, mortgage rates are now higher than they have been since April 2008, while inflation stands at a 40-year high. Although some home buyers benefit from the equity they have built in a sale of a previous house, they must contend with mortgages that are tens of thousands larger than they would have been for a similar house bought before the pandemic as property prices and mortgage rates reach new heights. Therefore, some house hunters, particularly first-time home buyers, are being priced out of the market or are considering postponing their house-hunting plans until interest rates cool down. However, due to the low Arkansas house prices, the Arkansas housing market is faring better than more expensive states.
Arkansas Metro Areas with the Hottest Housing Markets
Arkansas is a landlocked state in the South of the United States. Historically, the state was one of the principal centers of the production of cotton based on a system of large plantations and enslaved labor. In the 21st century, Arkansas's economy is based on service industries, aircraft, poultry, steel, and tourism, along with important commodity crops of cotton, soybeans, and rice. Although the state remains primarily rural, here are the hottest housing markets in Arkansas in terms of volume:
- Little Rock
- Fort Smith
With a population of 202, 591 according to the 2020 US Census, Little Rock is Arkansas’ most populous city and the state capital. Major companies are headquartered in the city, along with government services. In addition, the Little Rock port is an intermodal river port with a large industrial business complex. The housing market in Little Rock is competitive, with listed properties receiving two offers on average. 31.8% of houses for sale sold above the asking price in October 2022, and home prices are still climbing, with a median sale price of $230,450, 5.2% above the previous year.
Fayetteville is the second most populated city in Arkansas, with a population of 95,230 in 2021. Fayetteville is home to the University of Arkansas and was named the fourth best place to live in the United States in the 2021 U.S. News Best Places To Live Rankings. Walmart is headquartered in the city, along with other major companies, and Fayetteville fosters a dynamic research and entrepreneurial ecosystem through the University of Arkansas. The housing market in Fayetteville is very competitive, with many listed properties receiving several offers, some with waived contingencies. The housing prices in Fayetteville are continuing their upward trajectory, as 23.5% of houses for sale sold above the asking price in October 2022. The median sale price in Fayetteville was $379,915, 25.1% higher than the previous year.
Fort Smith is home to 89,142 residents, according to the 2020 US Census, making it the third most populous city in Arkansas. It lies on the Arkansas–Oklahoma state border and is a regional manufacturing center with major plants located in the city. The housing market in Fort Smith is competitive, with many homes receiving several offers and selling after 37 days on the market. Despite the general housing market slowing down, home prices in Fort Smith are still on their way up, with the median sale price in October 2022 reaching $185,000, 8.5% more than in October 2021.
Higher Mortgage Rates Could Slow Down the Price Growth in Arkansas
The Arkansas housing market is weathering the sharp increase in interest rates better than more expensive states, as Arkansas home prices remain significantly more affordable than the national average. Investors and new residents attracted by the dynamic job market and low real estate prices continue to fuel the demand for housing while the inventory remains limited. Therefore, Arkansas home prices continue to grow, but at a more moderate pace than in previous months.
As of December 2022, interest rates for 30-year fixed-rate mortgages are hovering around 7%, a level unseen since 2008, and stand approximately twice as high as the year prior. Therefore, a decrease in demand and, eventually, a market deceleration is to be expected.
Key Market Stats for the Arkansas Housing Market
According to October 2022 data, some of the key market stats for the Arkansas housing market appear as follows:
- Median home price: $279,900 – a 2.1% Y.o.Y. decrease.
- Home sales: 382 – 24.2% less than a year ago.
- Months supply of inventory: 2 – compared to 1 in October 2022.
- Mortgage rates as of December 1st, 2022: 6.49%.
Arkansas Historic Price Changes and Affordability
The Arkansas housing market has been following an upward trajectory similar to the one observed nationwide as new residents flocked from outside the state, seduced by the low cost of living, dynamic economy, and affordable property prices. The median home price has increased from $175,400 in October 2019 to $251,800 in October 2022, with a peak of $266,900 in June 2022, representing a 43.55% increase in 36 months. Property prices are still increasing in year-over-year comparisons in most of the state, but at a more moderate pace, indicating that there is still a noticeable shortage of inventory compared to the demand for housing in Arkansas.
Nevertheless, despite the relative affordability of Arkansas housing prices compared to the real estate values nationwide, the average income is not growing nearly as fast. Therefore, a market correction appears unavoidable as the demand decreases, with potential buyers finding themselves priced out of the market by the combination of the increasing cost of living, high mortgage rates, and high property prices.
- The median home price in Arkansas remains below the national average despite a general increase in the past two years.
- The state continues to seduce newcomers with its low cost of living and dynamic economy. Therefore, the Arkansas housing market is faring relatively well despite the rise in interest rates.
- Nevertheless, the increasing cost of borrowing money is leading to a general housing market slowdown, with longer times on the market and a decrease in the number of real estate transactions.