FAYETTEVILLE, Ark. – The average cost of a home in Arkansas is now $250,000 and the average income is $50,000.
Many first-time homebuyers are being pushed out of the market. The average age of a first-time homebuyer is now 40 years old. In 1991 the average age was 28 years old. Realtors say that there are several reasons for this: rising interest rates, stagnant wages and limited housing inventory.
Realtor and executive broker Andy Brown says that buyers who might have qualified for a $300,000 home just a few years ago no longer can. Interest rates, which fell to 2.9% in 2021, expanded buying power and pushed more people into the housing market. That surge, while good for buyers at the time, led to increased competition and bidding wars that inflated home prices.
“While low rates were great for people who got in at the time, they’ve been difficult on the overall housing market,” said Kristen Carroll, executive vice president of private banking and wealth management for Arvest Bank in Fort Smith, Arkansas.
Interest rates today are a little over 6%, which has greatly reduced affordability for first-time home buyers. For someone who earns $50,000 a year, financing a $250,000 home can be difficult – especially without any equity in a previous home.
“You either have someone help you, or you save for a longer period of time because you can’t afford to finance $250,000,” said Carroll.
Carroll added that high interest rates are not the only barrier to entry for first-time homebuyers; wages are also not keeping up with the price of homes. In 2011, the average cost of a single-family home in northwest Arkansas was 2.46 times the median income. Today, it is 4.66 times the median income, highlighting just how dramatically the region’s cost of living has climbed. A home in Fort Smith, Arkansas that sold for $99 per square foot in 2001 is now listed at $222 per square foot, nearly a 67% increase.
The challenges for first-time homebuyers are not just financial. Affordable starter homes are hard to come by, sell quickly, and often need repairs that buyers may not be able to afford.
“Home prices are so high, you know, and the stuff that’s available on the market just really isn’t something that meets what they’re looking for,” said Brown about his difficulties finding a home for a first-time homebuyer recently.
Both Brown and Carroll recommend first-time homebuyers to start with a lender, save for a down payment, and be prepared to act fast when the right home comes on the market.