Bank-Owned Residential Properties Selling in Market

This article focuses on residential real estate in active subdivisions reverting to bank ownership, as well as the marketing of residential real estate by financial institutions in Benton and Washington counties.

In the fourth quarter of 2009, based on our research of property records, 568 lots in active subdivisions in Benton County and 54 lots in active subdivisions in Washington County reverted to bank ownership.

With respect to new single-family dwellings, the numbers were indicated to be 42 and 38, respectively. An active subdivision is a subdivision (or a phase of a subdivision) where construction activity is occurring, or has recently occurred. This represents a subdivision that has not yet been completely built out.

In the third quarter of 2009, the number of lots and new dwellings in active subdivisions coming under bank ownership were not much different: 598 total lots in the two-county area and 79 new single-family dwellings.

Going forward we would expect the dwelling numbers to decrease, simply as a result of the lessening of the amount of new complete and unoccupied product remaining under private ownership. There remains a significant number of empty lots in active subdivisions.

Financial institutions in Benton and Washington counties made a decision in 2009 to move lots out of inventory. In Benton County, 285 lots in active subdivisions were sold by banks in the fourth quarter of 2009. The next-highest total for the year was 121 lot sales in the third quarter.

In Washington County, 26 lots were sold in active subdivisions by financial institutions in the fourth quarter of 2009. The third quarter reflected the highest number of lot sales by banks at 52.

The average lot prices received from bank sales in 2009 ranged from $16,091 (4Q) to $29,579 (3Q) in Benton County and from $23,974 (3Q) to $28,500 (1Q) in Washington County.

Sales of new dwellings in active subdivisions by financial institutions in the fourth quarter of 2009 totaled 72, with Benton County reflecting 58 and Washington County 14. Total sales in the two-county area increased from 16 in the first quarter of 2009 to 35 in the second quarter, and peaked in the third quarter at 113. Washington County’s percentage of the total ranged from a low of approximately 13 percent in the first quarter to a high of approximately 26 percent in the second quarter.

The average per-SF sales price of new dwellings sold by banks in the fourth quarter of 2009 was indicated to be $80.48, with the average price in Benton County being $80.70 per SF compared to Washington County at $79.57 per SF.

The second quarter of 2009 reflected the highest average price per SF for the two-county area at $84.64, with the third quarter reflecting the lowest average price at $79.76 per SF. The average per-SF price in Benton County increased between the first and second quarters of 2009, then decreased between the second and third quarters, and increased slightly between the third and fourth quarters. The highest average price for the year in Benton County was in the second quarter at $84.52 per SF.

In Washington County the average price decreased steadily throughout the year from the high point in the first quarter of 2009 at $100.01 per SF.

It is interesting to note that the average price per SF of all new dwelling sales in active subdivisions, including bank and non-bank owned, in the fourth quarter of 2009 was $94.08 in Benton County and $100.14 in Washington County.

Bank-owned residential inventory is selling. Our research supports that about 58.5 percent of total lot sales in active subdivisions in the fourth quarter of 2009 were by financial institutions.

In addition, financial institutions accounted for about 21.7 percent of total new dwelling sales in active subdivisions in the fourth quarter. 

Tom Reed is a partner in Streetsmart NWA of Fayetteville, which produces reports pertaining to the residential, multi-family, and commercial sectors of the real estate market. He may be reached at 479-575-9100.