Skyline Report: Healthy growth seen in Northwest Arkansas residential real estate market

Demand for new homes and disciplined building has resulted in perhaps the healthiest real estate market Northwest Arkansas has seen in more than eight years, according to the latest Arvest Bank Skyline Report and compiled by the Center for Business and Economic Research at the University of Arkansas.

“Steady, incremental growth continues to be the story in Northwest Arkansas’ residential real estate,” said Kathy Deck, lead researcher for the Skyline Report and CBER Director at the UA.

She credits the uptick in the economy and building in line with demand for the continued population growth as the reasons for the steady results in the back half of 2015.

Skyline researchers have tracked the number of lots in 377 active subdivisions platted for development in Benton and Washington counties since 2004. Tracking lots in the development phase through construction and sale provides bankers and developers with an overall all assessment of supply. Deck said in the back half of 2015, the researchers found the area’s residential lot supply at its lowest level since 2007, with just 48.3 months supply in the pipeline. Deck said there were an additional 5,113 residential lots that received preliminary or final approval in the second half of 2015 and when adding these lots the supply is extended to 76 months.

There were a total of 27,293 lots in the 377 active subdivisions identified in the Skyline Report during the second half of 2015. Of those lots, 7,670 were classified as empty, accounting for the 48.3-month supply. There were 140 lots classified as starts, 865 were under construction, 245 were completed but unoccupied and 18,373 were occupied. During the second half of 2015 there were 1,144 previously unoccupied homes which became occupied in that they were either sold or rented. This absorption rate increased 6.7% over the 1,071 homes reported that became occupied in the first half of last year.

Area bankers recently told Talk Business & Politics that many of the remaining open lots are in areas off the beaten path and there is a lot shortage in areas where demand is stronger, such as the Bentonville school district and parts of Fayetteville.

Veteran home builder Mark Marquess told Talk Business & Politics that over the past six years he had focused on acquiring dormant subdivisions and finishing out lots that were for sale by area banks. However, those days are almost over, and he is set to break ground this summer on a new development he’s calling the Villages at Sloanbrooke off Rupple Road and Wedington in west Fayetteville. He said this master community will have 97 lots in phase one and there are three distinct subdivisions within the development, ranging in price from $300,000 in the Estates, to $250,000 in the Enclave and $150,000 in the Cottages. The total buildout in three subdivisions will range from 500 to 600 homes. This new development will include a 17-acre park and small lake with an access trail to the Razorback Greenway.

“We said two or three years ago that builders would have to start doing their own development if there were going to stay in business, because of rising lot prices. A lot that sold for $15,000 two years ago would be around $35,000 today and it’s tough to make the numbers work acquiring a lot here and there,” Marquess said. “A builder would have to raise the home price or build a bigger house to make it work and that would be tough for those trying to build affordable housing,”

He said developers who sell the lots are taking a much bigger risk if they invest in the dirt and infrastructure and that risk is priced into the lots.

“When we do our own development we can digest the whole thing. In other words we have to eat what we kill, and there are synergies we gain by doing both the development and the construction,” Marquess added. “We plan to release about 30 lots for pre-sales by early summer to try create some pent-up demand. We really don’t have a time frame for the complete buildout and 500 lots seems like a massive amount, but over the past three to four years we have built and sold over 350 homes. Sloanebrooke will get up busy for a while.”