NWA residential building stalls in September

After a hectic building pace all summer, the residential starts in September were dead even with a year ago, cooling down from a 49% increase recorded in August and flat against a year ago.

The cities of Fayetteville, Springdale, Rogers and Bentonville cumulatively issued 104 new permits for homes during September. The permits totaled $24.688 million, compared to 105 permits valued at $24.638 million during September 2012.

MountData.com reports new homes are selling well throughout the region, with 68 pending transactions during September. The data firm reports that agents and builders sold 205 new homes during past 90 days, with an ending new home inventory of 366 properties, a 5.8-month’s supply.

The average selling price for new homes in September average $106 per square foot, according to MountData.com

Home builders in Northwest Arkansas have said 2013 is the best year they have seen since the market recovery began in 2009, and they expect to close 10% to 15% more transactions than they did a year ago.

In the two-county area, Rogers led the other cities with residential gains last month, issuing 30 new construction permits with a value of $6.323 million. Permit values rose 42% from a year ago when there 19 starts valued at $4.379 million. The other three cities each posted year-over-year declines in their residential building activity last month, negating the advances recorded in Rogers.

The permits slid 7.15% in Bentonville as the city approved 22 new starts valued at $10.556 million. This compared to 40 permits worth $11.370 million in the year-ago period.

In Washington County, Fayetteville’s residential permit values decreased 17% to $4.151 million last month. The city issued 17 permits, compared to 23 a year ago. In Springdale, builders received 15 new permits worth $3.749 million. Those values fell 3.37% from $3.880 million a year ago.

INDUSTRY FORECAST
Analysts expect housing to lead the construction industry to moderate growth in 2014, according to McGraw Hill Construction outlook. The company recently predicted that total U.S. construction starts for 2014 will rise 9% to $555.3 billion, higher than the 5% increase to $508 billion estimated for 2013.

“We see 2014 as another year of measured expansion for the construction industry,” said Robert Murray, McGraw Hill Construction’s vice president of economic affairs. “Against the backdrop of elevated uncertainty and federal spending cutbacks, the construction industry should still benefit from several positive factors going into 2014."

Murray said improving fiscal posture of states and localities will help to offset some of the negative impact from decreased federal funding through next year.

Areas like Northwest Arkansas are poised to participate in the moderate growth expected through 2014 as the region is enjoying steady job gains, rising home values and population increases, that Murray says will fuel the residential construction sector.

Single family housing is expected to grow 26% in total dollars, with a 24% increase in units constructed.

COMMERCIAL SECTOR
The local commercial construction pace rose 69% in September with nine new projects on tap among the four cities in the report. Permit values totaled $12.798 million, compared to $7.531 million a year ago.

The largest of these new projects is the Arkansas Music Pavilion under construction now in Rogers for an estimated $7 million, to start. Rogers also issued a permit to Casey’s General Store for a new convenience store at 1800 Hudson Road. Another permit valued at $1.643 million is for an office complex located at 1800 Osage Spring Drive.

In Springdale, the Arkansas Missouri Railroad is investing $898,000 in its downtown operation. In Fayetteville, one large office/retail center was permitted for construction on the west side of town, near the Wal-Mart Neighborhood Market off of Wedington Avenue.

One of the biggest catalysts for commercial construction are new residential rooftops as there is typically up to two years lag time between housing market gains and impact on new commercial real estate.

McGraw Hill estimates commercial building across the country will increase 17% in 2014, a slightly faster pace than the 15% gain estimated for 2013. Warehouses and hotels will continue to lead the way, while stores and office buildings pick up the pace.

Institutional building will edge up 2%, turning the corner after five years of decline. For the educational building category, colleges are revisiting capital expansion plans, and passage of recent construction bond measures in several states should help K-12 construction projects. Health care construction is expected to remain flat, given continued emphasis on cost containment.

Public works construction will drop 5%, pulling back after a 3% gain in 2013 that was lifted by the start of several large highway and bridge projects.

“The 2014 picture bears some similarity to what’s taking place during 2013, with single family housing providing much of the upward push; multifamily housing showing a slower yet still healthy rate of growth after four years of expansion, and commercial building gradually ascending from low levels,” Murray said.

Permit Comparisons (January through September)
Fayetteville
2013: $226.322 million
2012: $267.209 million
-15.29%

Bentonville
2013; $136.905 million
2012: $134.69 million
1.64%

Springdale
2013: $56.804 million
2012: $49.725 million
14.23%

Rogers
2013: $76.833 million
2012: $69.507 million
10.53%
(Permits are for new construction, additions and remodels are not included.)