Benton County?s Single-Family Market Remains Cool

The National Association of Realtors reported national median home prices fell 1.2 percent in the third quarter of 2006, and many experts still believe the overall housing market is still bottoming out.
This search for the bottom may also be the case in Northwest Arkansas as the year draws to a close and the number of homes sold as well as home prices continue to decrease.
In Northwest Arkansas, the oversupply of homes continues to be a hot button issue, however, in this column, a closer look at the Benton County single-family housing market will be examined.
To understand annual demand for new single-family housing, area lot activity should be examined.
According to the Reed Report, as of mid-year 2006, Northwest Arkansas had over 19,000 lots planned or commonly referred to as “in the pipeline.”
Also at mid-year, total home sales were down and average days on the market increased in comparison to year-end 2005.
Benton County experienced over 2,200 lot sales in 2005 and just over 1,700 lot sales in 2004. As of mid-year 2006, Benton County had only 499 lot sales, which is a significant drop compared to the past two years.
However, lot sales do not always reflect an accurate number of end-users and, in fact, this has typically been the case in Northwest Arkansas as the majority of lot sales have been to builders. Therefore, the Reed Report researches the number of lots occupied by an end-user.
In Benton County, just over 1,200 lots were occupied by an end user in 2005, which is slightly up from the 995 lots occupied in 2004.
At mid-year 2006, 682 lots were occupied in Benton County. This appears to reflect increased demand, if the second half of 2006 can equal the first.
However, the number of unoccupied lots prepared for single-family home development increased again.
At mid-year 2006, there were nearly 8,300 single-family unoccupied, developed lots. This is a significant increase from year-end 2005 when 7,294 unoccupied, developed single-family lots were indicated.
Also at mid-year 2006, Benton County had over 8,200 lots in the pipeline, which is another important figure to be mindful of.
These oversupply issues are not a new topic. For the past few years this has been the biggest concern in Northwest Arkansas as developers over addressed the population infusion.
However, as the housing market continues to cool, it will be interesting to watch home sales and prices as the year closes.
In Bentonville, demand remained strong at mid-year 2006 but the number of unoccupied, developed lots increased as well as the number of lots in the pipeline.
At mid-year, Bentonville had over 2,300 lots in the pipeline, the highest number for city in Benton County.
Bentonville also had over 2,800 unoccupied, developed lots at mid-year.
The Southwest and Western areas of the city remain the most active due to more land availability.
Rogers also reflected strong demand at mid-year, and on another positive note the number of lots in the pipeline decreased.
The number of unoccupied developed lots increased significantly, however.
Rogers had over 2,800 unoccupied, developed lots at mid-year 2006, which is considerably higher than the 1,949 unoccupied developed lots reported at year-end 2005.
Among the smaller cities near Bentonville and Rogers, Cave Springs and Centerton continue to lead the way in development.
Cave Springs had over 1,200 lots in the pipeline at mid-year 2006 and approximately 170 unoccupied, developed lots.
With over 70 lots delivered during the first half of the year and approximately 20 new lots occupied, the number of unoccupied, developed lots will certainly continue to increase at year-end.
Centerton continues to have substantial new development, in part due to its close proximity to Bentonville. At mid-year it had nearly 1,400 unoccupied, developed lots and another 1,300 lots in the pipeline.
Centerton’s affordable housing and access to Bentonville schools continue to make it an attractive alternative, but the oversupply of homes in this area may be a problem as the housing market slows down.
Pea Ridge is another smaller city that has recently experienced strong developer interest due to its close proximity to Rogers and Bentonville.
Lower land costs also make it a more affordable alternative.
At aid-year 2006, Pea Ridge had over 800 lots in the pipeline and nearly 600 unoccupied, developed lots.
Lowell, which has had little development due to sewer restrictions in recent years, is experiencing stronger developer interest in 2006.
At mid-year, approximately 600 lots entered the pipeline in Lowell.
With help from Rogers and Springdale, the sewer issues will improve and considering Lowell’s central location between Benton and Washington Counties, it will certainly be a market worth monitoring.
Siloam Springs, a market that has kept development in check over the past few years, is also heating up. Located west on Highway 412, Siloam Springs had over 800 lots in the pipeline at mid-year.
Although demand remains steady, Siloam Springs also had over 300 unoccupied, developed lots at mid-year.
Northwest Arkansas continues to benefit from good population growth and solid demand, which has kept the housing market strong for the past few years.
The Reed Report has been analyzing the single-family market in Northwest Arkansas since 2002 and notes the affordable housing market should remain strong.
However, the oversupply issues in areas of Benton County, where many homes are priced above $225,000 are of major concern as the housing market continues to cool.