Home sales in Benton and Washington counties totaled 4,747 homes in the first half of 2019, up 7% from the same period in 2018. That was the third-highest total since 2005, according to a new report on residential real estate. Meanwhile, the available number of lots on which to build new homes continues to decline while the average price of homes sold rises.
Fayetteville-chartered Arvest Bank released Tuesday (Aug. 27) the Skyline Report on residential real estate for Benton and Washington counties. The biannual reports 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 the first half of 2019, average prices for homes sold rose 5.3% to $250,608 in Benton County and 0.1% to $235,893 in Washington County, from the same period in 2018. Over the past five years, average prices for homes sold have increased 33.2% in Benton County and 28.1% in Washington County. Over the two-county area, the cost of a home has increased by 5.2% to $116.64 per square foot this year, from $110.85 in 2018.
Of the homes that were sold in the first half of 2019, 27.3% of the homes were new, and this is the highest percentage since 2005, when the Skyline Report was started. CBER Director Mervin Jebaraj explained a recent trend for new homes in Northwest Arkansas is that not only are the prices higher than the average home price, but the new homes are also smaller because of the high cost of land.
“Previously, people bought expensive land and built the biggest house they could on there to sell for the highest dollar they could, but now people are buying really expensive land and no longer building the biggest houses to recoup some of the money they need to build more homes on the same land,” Jebaraj said. “It’s a very strong trend in Fayetteville and Springdale we’ve noticed. It’s a little weaker in Bentonville and Rogers.”
Over the short term, the ability to meet the demand for housing is reliant on enough new homes being built in order to have enough supply, the report shows. The number of building permits issued rose 7.9% to 1,946 in the first half of the year, from the same period in 2018, and this was the highest total since 2006. Fayetteville issued 338; Bentonville, 277; Rogers, 222; Centerton, 173; Bella Vista, 129; and Springdale and Prairie Grove, 101 each.
In the long term, a shortage of lots could impact future building as the number of months of inventory of available lots continues to fall, based on existing absorption rates. The inventory reached a peak of 281 months in the first half of 2011 and has since fallen to 25.6 months. In the first half of 2018, the inventory rose to 29.6 months, from 28.9 months in the first half of 2017. Since 2014, the inventory has fallen 56%, from 58.2 months.
“With the area continuing to attract newcomers, and as young people continue entering the home buying market, the need for new homes is likely to continue for quite some time,” Jebaraj said. “In order to meet this future demand, it is up to our cities to find ways to allow more utilization of current areas for residential development, as many consumers wish to live close to desired amenities. Land for development in less populated areas should not be an issue, but land for development within cities is also needed, along with the water and sewer infrastructure needed to support residential developments.”
As of June 30, the MLS database had 2,357 homes listed for sale at an average price of $383,343.
“The real estate market in Northwest Arkansas continues to be strong for developers, sellers and buyers,” said Mark Ryan, executive vice president and loan manager with Arvest Bank of Benton County. “We are working with our residential developers to provide the financing they need to keep supply levels in line with demand, and our mortgage lenders have been very busy this year helping our customers get the home loans they need.”
In September, Arvest Bank will release the Skyline Reports on commercial and multifamily real estate for the first half of 2019.