The latest Skyline Report released Wednesday (March 8) included a key historical finding. Significant absorption of new homes led to the lowest level of remaining months of unbuilt lot inventory — 35.1 months — since the inception of the report in 2004.
The report also noted an almost equal increase in building permits issued, with a 37.0% increase over the same period in 2015, and new homes being occupied showing a 37.6% increase.
“Given the increase in building permits we’ve seen during the past twelve months, it is quite impressive that the absorption of newly constructed homes has kept pace,” said Kathy Deck, lead researcher for the report and director of the Center for Business and Economic Research (CBER) at the University of Arkansas Walton College of Business. “Overall, the residential real estate market is as hot as we’ve seen it since the recession. Moving forward we will be paying attention to two issues that could slow down the pace of absorption — the forecasts for slower job growth in the area and the price of lots that are remaining, as this could limit builders’ ability to build the price of homes that are selling.”
There were 1,561 building permits issued in Benton and Washington counties in the first six months of 2016, according to the report, and 1,574 new homes sold in the last six months of the year, indicating good balance between the number of new homes being constructed and the number of new homes being purchased. In the second half of the year there were 1,638 permits issued, a 37% increase from the 1,196 permits issued during the same period of 2015.
The average sale price of homes sold during the period increased 7.4% from the same period in 2015 in Benton County, from $206,575 to $221,944. In Washington County, it increased 6.7%, from $189,093 to $201,804.
Centerton has emerged as a hotbed of building activity, according to the report. The number of building permits issued in the growing town west of Bentonville from July through December was 208 — a 49.9% increase year-over-year and the third highest total of all cities in Northwest Arkansas. On the same note, there were 288 houses sold in the city during the period, a 46.9% increase over the same period in 2015.
“It is good to see the residential market being so active while also remaining well-balanced in terms of supply,” said Deck. “The market was equally hot prior to the recession, but at the end of 2006 there were more than 2,500 complete but unoccupied houses on the market. Now there are fewer than 300. We hope that this balance is sustainable moving forward.”
The Skyline Report is a biannual analysis of the latest commercial, single-family residential and multifamily residential property markets in Benton and Washington counties. The report is sponsored by Arvest Bank and conducted by the CBER.
“As Northwest Arkansas has continued to experience strong growth, we at Arvest have had the opportunity to help thousands of customers get into homes,” said Craig Shy, executive vice president and loan manager for Arvest Bank in Fayetteville. “During the next several years, expectations are that interest rates will rise slightly, but we keep reminding customers that even if rates increase slightly, they will still be very, very low from a historical perspective. The best news is that, in a balanced market like this, it is generally good for both buyers and sellers, as is evidenced by the large number of both new and existing homes that sold during the last half of 2016.”