Hot Springs, Arkansas
Hot Waters & a Hot Market for “America’s First Resort”
By Carole VanSickle Ellis
In Hot Springs, Arkansas, 47 natural thermal springs send about 1 million gallons of water measuring 143°F flowing through the area before emptying into Lake Hamilton. The city, which is sometimes referred to as “The Valley of the Vapors” and has dubbed itself “America’s First Resort,” has been primarily supported by the hospitality industry since long before that term existed.
Hot Springs is also considered to be the “birthplace” of Spring-training baseball thanks to hosting the Chicago White Stockings (now the Chicago Cubs) in 1886. In subsequent years, many other teams followed suit.
The area boasted casinos and other gambling venues until the late 1960s (today, they are once again in operation) and has long been home to spa and bath houses, health centers, and medical facilities. In keeping with its unusual and diverse attractions, the Hot Springs housing market tends to go against the grain and stand apart from state and national trends both in terms of avoiding extreme or protracted lows and in terms of remaining relatively calm even in the face of national volatility.
Of course, that relative lack of volatility does not mean that the market has not seen growth over the past few years. In fact, Hot Springs is currently on a bit of a “hot streak” that is probably not over yet, experts say.
“The Hot Springs housing market has seen a 6.2% appreciation rate over the last five years, [and] over the past 10 years, the city experienced a cumulative 29.99% appreciation rate,” observed Movoto analyst Alan Woods. He also noted the Hot Springs appreciation rate is “about 50% higher than other Arkansas cities,” possibly in part because the city boasts “the only legal casino for hundreds of miles.”
Hot Springs real estate benefits from the unusual nature of the local hospitality industry, which is more focused on health and wellness than many such markets. As a result, the area does not always experience the sharp economic swings to which similar markets are subject. Even during the Great Recession, when national home prices plummeted, Hot Springs median home values fell relatively small amounts and recovered quickly, falling briefly between 2013 and 2016 only by about $6,000 at the nadir and exceeding 2013 prices by the start of 2017. The trend of gentle price acceleration continued until 2020, which posted a minor dip of just about $3,000. By 2021, home values were climbing once more.
Woods credited the city’s focus on historic preservation and renovation as a significant contributor to local housing market health. According to a 2020 study published by PlaceEconomics, “Hot Springs is the star” when it comes to preserving historic buildings and landmarks in ways that benefit the local economy. The group also called the city “a national success story” for its leverage of tax-credit programs encouraging historic preservation toward creating new jobs and businesses in the area.
Between 2009 and 2020, 16 major initiatives led to nearly half a million dollars in annual earnings, jobs, and local tax revenue, creating momentum that shored up downtown Hot Springs during the COVID pandemic and associated lockdowns. However, Hot Springs did not emerge during the pandemic as a “zoom town,” a location to which people moved in order to avoid more urban areas, but rather simply posted steadily rising real estate values that have not yet ebbed or leveled off. This is a positive sign for the market because many zoom towns are expected to soften as more companies backpedal on their “permanent-remote-work plans” and require employees to return to the office.
A Healthy Market for the Buyers Seeking Affordability
Despite its unique natural attractions and recession-resistant housing market, Hot Springs real estate has remained consistently affordable relative to the rest of the country. In fact, it is consistently listed as one of the most affordable areas in the country in which to own real estate. According to Payscale.com, area housing expenses are 17% lower than the national average and transportation expenses (bus fare, gas prices, etc.) are about 11% lower than the national average. Food and grocery costs tend to hover around 3% below the national average, while healthcare is a full 20% lower.
Interestingly, the relatively low cost of living in the area (Hot Springs median home prices were about $150,000 lower than the national median home price in July of this year) could be having some unexpected fallout for housing-choice voucher programs in the area. According to reporting by the Arkansas Democrat Gazette in August 2023, the number of Hot Springs landlords willing to accept housing choice vouchers is on the decline. In fact, 13% of the vouchers assigned by HUD this year were not in use at the end of May.
“There has been a shift in the market primarily due to economic conditions but also short-term rentals,” said economic planning consultancy RKG president Russell Archambault during a July Board of Directors work session in Hot Springs. He said short-term rentals have created “a different economic incentive for moving away from those subsidies: less management, higher profits.” Archambault warned the city could lose its rental vouchers if the issue is not “cured.” Hot Springs recently increased vouchers to 120% of fair market rent in hopes of making them more attractive to property owners and real estate investors.
Short-term rental owners may soon encounter another incentive to look closer at housing vouchers; the Hot Springs area has begun targeting vacation rentals in an attempt to rein in what locals describe as “unneighborly behavior” in the properties. One lakefront neighborhood recently forced a local vacation-rental owner to apply for a special-use permit for their investment property and, subsequently, the Hot Springs Board of Directors denied the owner that permit. The board cited high densities of short-term rentals in the area as the reason for the denial.One director asked, “At what point do you have the density of short-term rentals before you say this is really becoming a business area as opposed to a residential area?”
Local property owners have complained that short-term rentals in their area are contributing to “crime, traffic, and sanitation issues” in the neighborhood. On a state level, the Arkansas legislature is currently considering regulations that would require short-term rental owners to remove their property listings for up to 30 days if they are cited for violating the same local ordinance three or more times within a 6-month period.
Potential for More Heat in 2024
While many cities around the country are beginning to ready themselves for a “cooling” period in their real estate markets simply because so few homeowners are putting their homes up for sale, Hot Springs has the potential to heat up further in 2024. At present, housing supply in the area is rising, with the number of homes for sale in August 2023 up nearly 58% over the number of homes for sale in July. Analysts predict more homes in the area could come on the market in the coming months as retirees opt to cash in on rising home prices, particularly when it comes to waterfront homes.
“Increasing home prices can, indeed, be a tempting opportunity for retirees looking to sell,” said investment firm David Lerner Associates analysts in response to recent predictions that retirees would bump the housing inventory upward. The group added, “The oldest Americans, including Baby Boomers and retirees, are not always considered trendsetters, but they are at the forefront of home-selling.”
“Median home prices…increased in the past year [and] more people are moving [to Hot Springs] and buying property for a good lifestyle,” said Eli Pasternak, a local agent and investor at Liberty House Buying Group. He concluded, “That is why retirees are selling their homes in this city.” According to an nSkope Predictive Analytics report, more than one-fifth of listings are likely to be retiree-owned in Hot Springs by the end of 2023. With median list prices still hovering just over $212,000, the area remains far more affordable than much of the rest of the country and represents a significant opportunity for investors.
SIDEBAR
By the Numbers
8 — Hot Springs was ranked 8th in the nation by USA Today on its list of “Best Horse Racing Tracks in 2023”
1 — Hot Springs was ranked first by USA Today on its list of “Best Arkansas Attractions”
1 — Hot Springs was ranked first by USA Today on its list of “Best Botanical Gardens” for the 210-acre Garvan Woodland Gardens
3.1% — Seasonally adjusted unemployment rate in Hot Springs as of June 2023
2.1 Million — Number of visitors to Hot Springs National Park (National Park Service (NPS), 2021)
$154 Million — Amount of money park visitors spent “in communities near Hot Springs National Park (NPS, 2021)
2,200 — Number of jobs supported specifically by park visitors in Hot Springs
$208 Million — Cumulative benefit of the Hot Springs park alone to the local economy (NPS, 2021)
