Home prices in Northwest Arkansas increased as the number of building permits issued in 2018 rose to the highest level in 12 years, while the apartment vacancy rate fell as the number of building permits issued for multifamily projects more than doubled over the past year, according to a new report on residential and multifamily real estate.
Fayetteville-chartered Arvest Bank on Tuesday (March 5) released the Skyline Report on residential and multifamily real estate for Benton and Washington counties for the second half of 2018. The biannual reports, which also include the commercial real estate market, are completed by researchers at the Center for Business and Economic Research (CBER) in the Sam M. Walton College of Business at the University of Arkansas.
In 2018, the number of building permits issued for new homes was 3,338, the highest since 2006. In the second half of 2018, the number of building permits rose 7% to 1,534, from the same period in 2017. The number of building permits rose 41.8% to 285 in Fayetteville, 24.8% to 252 in Bentonville and 32% to 66 in Siloam Springs. The number of building permits declined 4.2% to 136 in Rogers and 54% to 75 in Springdale.
The average price of homes sold in Benton County rose 7.1% to $244,478 in the second half of 2018, from $228,310 in the same period in 2017. The average price of homes sold in Washington County rose 4% to $228,681, from $219,876. At the end of 2018, 2,426 houses in Northwest Arkansas were listed for sale in the Multiple Listing Network database at an average price of $354,315.
The number of newly built homes that became occupied fell 6.8% to 1,387 in the second half of 2018, from the same period in 2017. As a result, the number of complete but unoccupied homes more than doubled to 524, from 238, over the same period. CBER Director Mervin Jebaraj wasn’t concerned with the rise and noted the high absorption rate of newly built homes over the past several years.
“We consider this increase to be a factor of timing more than shrinking demand for new homes or overbuilding,” he said. “With regional unemployment remaining low and population growth continuing, I am confident that the new homes being built will continue to be bought. The market for single-family homes, both new and previously owned, remains strong. In short, homes are being built and bought at a rapid pace despite average prices increasing and interest rates being higher than they were a few years ago.”
At the end of 2018, the 421 active subdivisions in Northwest Arkansas had a 29.3-month supply of lots, based on the rate of absorption over the past 12 months. This is up from a 27.3-month supply at the end of 2017 and down from a 29.5-month supply in the first half of 2018. The supply was 58.7-months at the end of 2014.
“One of the main things we will be looking at as we move forward will be home affordability,” Jebaraj said. “The median multiple, a gauge of home affordability tied to incomes, continues to go higher. While a healthy median multiple is 2.5, that gauge is 3.1 in Benton County and 3.9 in Washington County.”
Because of the declining lot inventory and rising home prices, more residents are moving into multifamily properties, the report shows. The total square feet of these properties rose 11.3% in the second half of 2018, from the same period in 2017, yet their vacancy rate declined over the same period. The vacancy rate fell to 3.5% in the second half of 2018, from 4.5% in the same period in 2017.
The number of building permits issued for multifamily properties rose 157.9% to 276 in 2018, from 107 in 2017. The total value of the permits rose 181.9% to $372.9 million in 2018, from $132.3 million in 2017. The 2018 permit value was the highest since the inception of the Skyline Report in 2004. Average apartment rent per month rose 4.5% to $674.65 in the second half of 2018, from $645.62 in the same period in 2017.
Gene Gates, senior vice president and commercial loan manager for Arvest Bank of Fayetteville, said “as the region’s largest bank, we are seeing developers, both of single-family homes and multifamily properties, continue to expand their efforts to meet the housing needs of the market. Also, as the area’s largest mortgage lender, we are helping many of customers get the mortgage loans they need to buy homes throughout the region — both newly constructed and previously owned.”