The construction sector in Northwest Arkansas was firing on all cylinders in August among the region’s five largest cities.
Bentonville, Rogers, Siloam Springs, Springdale and Fayetteville issued new constructions permits valued at $45.364 million in August, up 116% over the same month in 2011.
The region had a healthy mix of both residential and new commercial activity as the two building sectors were almost equally responsible for the triple digit increase from a year ago.
Local homebuilders – from low-cost providers to high-end custom contractors – rate 2012 a 7 out of 10 in terms of overall health.
“I am the busiest I can remember in at least four years, with four custom homes for local executives and another one to start in the next month,” said Lee Scarlett of Celtic Custom Homes.
Scarlett said his custom home business is running at maximum capacity with five projects, all at various stages.
“I’ve been in this business for 18 years and finished 108 projects in that time, and I’ve never built the same house twice. The projects under construction now range from 3,450 square feet to 6,000 square feet, and each take between eight and 10 ten months to complete,” he added.
He said the custom home market has picked up steam gradually following the lead from the broader economy.
“At the slowest point in the local market I built two homes a year, which just pays the bills for my small business, so I am excited to see more projects coming online from retired couples and corporate executives at Tyson, Wal-Mart and Proctor & Gamble,” Scarlett said.
The five cities issued a combined 126 new home permits in August valued at $28.838 million. This compared to 87 permits worth $17.733 million a year ago.
Bentonville was the busiest of the five cities in August, issuing 50 new residential permits totaling $12.996 million — some 40% of the region’s total. A year ago, Bentonville builders got 20 permits which were valued at $5.194 million.
Fred Rausch, CEO of Rausch Coleman Homes, said the Northwest Arkansas market is recovering nicely and Bentonville has been the hottest market in terms of new demand with Fayetteville following close behind.
“We are on track to hit our goal of 200 closings this year in our Northwest Arkansas region which includes Fort Smith and Joplin. That’s about 20% of our total company business among the markets we serve.” he said.
Rausch Coleman also has projects ongoing in larger metro areas of Tulsa, Oklahoma City, Kansas City and Little Rock.
“I think the builders in Northwest Arkansas are working at a sustainable pace – it’s not frantic by any means – but folks are working again and moving the product fairly well. There are no real inventories building up,” Rausch said.
Last month Rogers issued 26 new residential permits valued at $4.840 million, down 11.4% from August 2011.
Springdale’s new residential permits total $2.829 million, up a whopping 431% from a year ago in the month of August.
Rausch Coleman is actively building in the Springcreek Subdivision near Wagon Wheel Road for an investor, and pulled a handful of permits during August.
“This is the time of year when builders will generally pull several permits for the projects they will build out through the winter months. Permits pulled in August are generally ready to put on the market in time for spring,” Rausch said.
Fayetteville issued 34 permits valued at $7.555 million in August, values rose 18% from a year ago.
Siloam Springs also posted a year-over-year gain in residential building activity as Riggins Construction pulled five permits for new homes in the city. The five permits were valued at $617,820, this compared to $274,862 a year ago.
Rausch said it doesn’t matter if you are a low-cost provider or a custom home builder, buyer demand across the board is linked to job security and credit worthiness.
“The low interest rates are fantastic, but if a buyer doesn’t feel good about their job security they are less likely to spend money for a new home. The better job market in Northwest Arkansas is a big reason the housing sector has picked up this year. We hope this momentum can be sustained,” Rausch said.
The National Home Builder Confidence Index reading from the month of August hit its highest level in six years. And builder sentiment for the next six months was also positive as contractors expect to see their best sales since the summer of 2006.
John Silvia, chief economist at Wells Fargo Securities, says the housing market has become a bright spot and catalyst in the overall economy after years of being a negative drag.
Home prices are rising for many existing homeowners and Northwest Arkansas is following that trend. Scarlett and Rausch said local builders have gotten inventories low enough to be able to take a price increase in the coming months on new projects.
Tom Reed, appraiser and partner at Street Smart Data, says lot prices are down, while supplies and labor costs have been fairly steady which means builders have been able to make up some of the margins they lost in recent years. He agrees new home prices will likely go higher in 2013 as builders have finally gotten inventory levels below demand.
Commercial contractors are busy across Benton County with several large projects ranging from retail to institutional.
Siloam Springs issued permits for a $2.6 million project at John Brown University, this compared to total projects of $109,862 a year ago.
Rogers issued a total of $8.451 million in August permits for several large retail projects what will be home to Marshalls HomeGoods, Hallmark, Shoe Carnival and Michaels. Casey’s General Stores has two projects under way in Rogers. A year ago, August permits totaled $673,440.
Bentonville’s commercial permits were boosted by a $3.136 million Harp’s Store under construction along North Walton Boulevard and a $1.801 million car dealership for Landers McLarty Pre-Owned along Moberly Lane. The city issue no new commercial permits in August 2011.
Springdale issued one large commercial permit for a Kum & Go Convenience Store at 2351 Sunset Ave. That permit was valued $537,447. A year ago, the Arkansas Missouri Railroad warehouse project was valued $1.519 million.
Fayetteville did not issue any new commercial permits in August, compared to valuations of $963,872 a year ago.
The five cities together signed off on $16.536 million of new commercial projects in August, up from $3.266 million a year ago. Through the first eight months of 2012 all of the cities except Siloam Springs have seen more large commercial permits than in the year-ago period.
(January through August)
2012: $218.246 million
2011: $94.34 million
2012: $122.234 million
2011: $89.851 million
2012: $47.634 million
2011: $25.232 million
2012: $65.988 million
2011: $53.076 million
2012: $8.946 million
2011: $25.254 million
(Permits are for new construction, additions and remodels are not included.)