Some Homes Built with Blueprint for Success

Jackson Williams tells potential buyers that the Lakewood neighborhood is the safest in Northwest Arkansas, but he’s not talking about the crime rate.

In February 2007, with the area real estate market on the cusp of a significant correction, construction began on the first of the luxury garden homes off Zion Road in northeast Fayetteville.

The market was already struggling to absorb excess inventory built up over the peak period from 2004 to 2006, so the prospect of bringing more product on-line may not have seemed smart business.

Lakewood, however, has bucked every negative trend in the area market and 62 homes have sold out of the 89 available lots. Not only has the project filled up quickly, but two homes have already flipped, selling within two months and fetching more than the original price.

“It’s really got to be the safest subdivision to buy in right now, maybe in Northwest Arkansas,” Williams said. “In Fayetteville, it’s hard to beat it.”

Tim Cooper, the architect behind Lakewood Homes and a member of the four-man ownership group, said the re-sales have been a positive sign.

“That really tells you that we’re putting out a good house for a good price and it holds its value,” he said. “It immediately appreciates.”

Lakewood has certainly been a blueprint for success in Northwest Arkansas, and Williams said he’s seen visitors from across the state and Missouri who have sought advice on how to recreate it.

Williams said the average sale price at Lakewood has been between $215,000 and $220,000, about $30,000 above the average for Washington County.

There are several reasons Lakewood stands out in Fayetteville. Quality for a good price is a major factor.

Williams said the pricing is cost-based, meaning the Lakewood Homes ownership group of Cooper, Tom Buffington, Mike Lamberth and Clay Carlton, is taking a smaller margin per home. The result, however, has been “no dicker” pricing and every home has sold for its list price.

“We kept a close eye on costs throughout the process and have a lot of flexibility on making decisions,” Cooper said. “All decisions are made in-house. It’s not three or four groups trying to come to agreement. We’re able to stand behind what we say as far as price.”

Cooper said each partner brings a different specialty to the group, and their relationships have been the most important part of their success.

“We just happened to have the expertise at the same time and all of us worked well together,” he said. “The chemistry we have as partnership has been fun to work with and it’s easier to make decisions when you have that kind of trust.”

Other factors behind Lakewood’s success was targeted marketing to empty-nesters and young professionals, Williams said. There are six floor plans available (it takes about five months to build a home); three have the master bedroom upstairs, three have it downstairs.

A downstairs master bedroom is key to targeting an older demographic that may have mobility issues, and Williams said around 90 percent of the sales so far have been split equally between their two targeted buyers.

Unlike some of the vast empty subdivisions built on spec in Northwest Arkansas, Lakewood has been built out as it’s sold. It started with around 13 presales and doesn’t have more than four or five spec homes under construction at any time.

“We’ve always limited ourselves,” Cooper said. “We’ve sold about three starts every month and we’re getting ready to pull the permits for three or four more. That’s what’s amazing in this market — that we can still do three or so starts per month.”

The group worked so well together, it is embarking on another project called Crescent Lakes near Stonebridge Country Club in south Fayetteville along with partners Neal Pendergraff and Mark Blackwood.

Williams noted that the smallest home is 3,137 SF and priced at just $280,000, or $89 per SF. Williams said five homes have been built, with three already sold and two more under construction.

Residential building permits were down steeply in the second quarter, according to the Skyline Report prepared for Arvest Bank by the Center for Business and Economic Research at the University of Arkansas.

From February to May 2008, the quarter before the heavy construction season, there were 416 residential permits issued in Washington and Benton counties compared to 744 in the same period of 2007.

Around 300 of the 416 permits were for homes less than $200,000, which remains the dominant price point, and 113 were in Fayetteville compared to Springdale (40), Rogers (70) and Bentonville (64).

Another Fayetteville subdivision doing well is Mountain Ranch in the western edge of the city where commercial and residential construction is still strong.

Rouse-Walker Properties purchased several lots in the 460-acre development for $770,000 in October 2007 and its construction company, Cobblestone Homes, began selling houses ranging from 1,600 SF to 2,600 SF.

Of the 118 lots in the subdivision, 24 homes have sold in a range of $171,000 to $236,000 and another nine lots have homes under construction. Cobblestone Homes has been busy in west Fayetteville. Its nearby Salem Heights subdivision has sold 62 out of 72 lots since 2006.

Washington County, by the numbers, does not appear as burdened with excess inventory as the more populous, more affluent Benton County where many builders tried to score big with homes priced $250,000 and more.

According to the Skyline Report, Benton County has 853 complete but unoccupied homes compared to 414 in Washington County. Average sale price bears this out, as sale prices in Washington County increased 5.3 percent in the second quarter while they declined by 3.3 percent in Benton County.

Centerton has 240 complete but unoccupied homes with a population of just 2,815. That’s nearly as many as in all of Rogers (269), which has a population of 54,959.

Not surprisingly, Centerton has seen its average sale price plummet from a peak of around $175,000 to about $130,000.

Inventory has been dropping in Northwest Arkansas, according to Arkansas Realtors Association director of media relations Ethan Nobles.

From Aug. 3 to Nov. 3, Nobles said inventory in the two-county market declined by 445 homes, from 6,667 to 6,622. Compare that to the six-county central Arkansas market tracked by the ARA, which has 200,000 more people but nearly 1,000 fewer homes for sale with 5,515.

Average list prices have also been on a march downward, from $253,585 on March 31 to $234,330 on Nov. 3.

Nobles said he’ll be watching for when list prices start going back up while inventory continues to decline as a sign the market is returning to normal.

“We’ll know then it’s stabilizing,” he said. “We’ve still got some correction left.”