As Arkansas pulls itself out of the recession and housing market crisis, secondary home purchases in two of the state’s most popular getaway spots, Hot Springs and Heber Springs, are on the rise.
In Hot Springs, the biggest market for second homes is around Lake Hamilton.
"The amount of growth for lake homes and lake condos has just been phenomenal," said Andy Meyers, executive broker for Meyers Realty. Meyers has dealt with the town’s secondary home market for 22 years, which, he said has enjoyed stability for most of the time he’s been in business.
"It was very consistent for a good period there during the ’90s," he said. "Growth was fairly consistent, and the good thing about not booming is you don’t tend to bust."
Then 2004 and 2005 brought along the housing boom.
"Money was so easy to get; everybody rode that train for a while," Meyers said. The eventual crash, however, squeezed financing options, and the ripples spread to Meyers’ market.
Foreclosures came next. Most of the residences foreclosed on were condos, Meyers said, and many of them are still on the market.
Overall, though, even with the condo difficulty, Meyers said the field’s getting better, noting that lake home sales have increased 30 percent so far this year as compared with 2011.
(Click here for a related story on the second home market in Bella Vista.)
Jim Kellstrom, owner of Hot Springs 1st Choice Realty, also deals with the Lake Hamilton area, and agreed that the market is improving.
"It’s firming up and getting stronger," he said. "Last year, I closed on a house on the lake that was $2.3 million, and it had been on the market for some time."
He said secondary buyers are starting to feel better about individual retirement accounts and are boosted by a strengthening stock market. Low interest rates, he noted, are also helping.
Most of those buyers are from central Arkansas, and the rest are within a day’s drive of their primary homes.
"There are people coming from Louisiana and the Dallas region, Memphis," Meyers said. "Typically they have a family tie in the area. They look at having a weekend place in Hot Springs that’s an easy getaway."
Some others are buying lake homes as investments. The average list price for a Hot Springs lake home or condo this year is $310,000, Meyers said, and the average sale this year has been $174,000, versus 2011’s $244,000. Meyers said the highest sale he’s seen so far in 2012 was $760,000. Almost a third of his buyers pay for their second homes in cash.
"Historically, it’s been amazing; anywhere from 25 to 30 percent are cash," Meyers said. That figure hasn’t helped deplete the glut of condos, though.
After the crash, the Lake Hamilton market built up a four-year supply, which Meyers said has been the most difficult part of recovery.
"They’re difficult to finance, and just the sheer number of units available has really thinned out the market," Meyers said, adding that down payment requirements are high and many buyers with good credit can’t get a loan.
Not only that, but most of the unclaimed condos are competing with existing units that have better boat dock availability. Fortunately, Meyers said, the financing options are starting to increase.
"We’re just now starting to see that relax a little bit," he said. "We hope it will continue to relax, within reason. I don’t want to see people [getting loans] for more than they’re worth."
Kellstrom also said the dead condo market is on its way back.
"We’ve already closed on six or seven on the lake this year," he said, and he’s enthusiastic about the demographic trend.
"I think we’ll continue to see growth in our lake market," Kellstrom. "Baby boomers are retiring, and they had parents that were pretty frugal, so they probably inherited some money. I think our market, as well as the other second home markets, will continue to improve."
Heber Springs
Around Greers Ferry Lake, the market is bumpy but improving. Doris Underwood of Underwood Real Estate Inc. is optimistic her market will turn around, but she’s had a rough year so far.
"I have a lot of properties I’d like to sell," she said. Her best year was 2006, and she had a string of sales during the first eight months of 2011, but the market flattened back out afterward.
Mark McKenzie, principal broker for McKenzie Realty Group, has had the opposite experience. He said his sales have picked up since thier low point in 2009.
"On Eden Isle, which is the easiest barometer, there were $3.6 million of transactions in 2009, and in 2011, there were $9.25 million," McKenzie said. "We’ve recovered very nicely."
Eden Isle, a resort community, had an average sale price of $385,000 in 2011, with condos starting at $110,000. McKenzie said his firm’s average price on Eden Isle in 2011 was $350,000.
McKenzie said 2011 was his best year in four years, and he feels one of the market’s strengths is actually in its turnover.
"The reason is that people get here and they want to upgrade," he said. "A lot of people start with one of those 110 condos, and after two or three years, they want a house, or vice versa."
The people tend to stay in the area, McKenzie said, and Underwood also lauded the living conditions and natural beauty of the area. Many of the buyers are from Little Rock and the Memphis area, with others coming from around Arkansas, McKenzie said.
McKenzie said buyer confidence is increasing and quality of life is keeping longtime residents around. The condo glut seen in Hot Springs isn’t present in Heber Springs, and McKenzie didn’t see many foreclosures after the 2008 crash.
Underwood said financing is a big issue and most of her sales these days are in cash. McKenzie said his sales are split down the middle between cash and financing.
The determining factor for each market’s success or failure, ultimately, is the economy’s full recovery.
"I think our economy needs to improve," said Underwood. "It needs to get better nationally. We need more stability."
In McKenzie’s opinion, the market’s already there.
"It was tough in ’08, and a little bit into ’09," he said, "but it’s been fantastic over the last couple of years."
In Hot Springs, Meyers said, there’s still more work to be done.
"I think we’re going to see a slow, steady recovery," he said. "I think as consumer confidence improves and lenders themselves feel more confident on lender homes overall, guidelines will become a little softer. That will help with the absorption of other properties and resale properties that ultimately leads to appreciation."
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