Northwest Arkansas’ housing market had another strong year in 2019, with more than 10,000 home sales in Benton and Washington counties.
Real estate agents combined to sell 10,627 residential properties in the two-county area. That’s according to data from the Matrix software platform used by the Northwest Arkansas Board of Realtors (NABOR).
Those figures represent a 6.3% increase from 9,992 home sales in 2018, according to the data. That’s an improvement when compared with the year-over-year gains of a year ago. Unit sales, according to historical data previously reported by the Northwest Arkansas Business Journal, were up 1.3% in 2018. That followed annual gains of 7.7% in 2017 and 9.1% in 2016.
The increase in the value of home sales was even sharper in 2019. The combined price of single-family properties sold in the two-county area last year reached an all-time high of $2.64 billion, up 12.3% from $2.35 billion in 2018. Home sale values topped $2 billion for the first time in 2017 ($2.18 billion).
The median price of a home sold in Northwest Arkansas last year rose 7.3% to $208,750.
Broken down by county, Benton County home sales in 2019 topped the $1 billion mark for the fifth consecutive year, with a 12-month sales volume of $1.75 billion, up 16% from 2018. Unit sales were up 8.8% to 6,862. The average selling price of a home in Benton County was $255,639, up 6.7% from the previous year.
In Washington County, total sales volume rose 5.5% to $890.97 million last year, while unit sales were up 2.14% — 3,686 to 3,765. The average selling price of a home in Washington County was $236,646, up 3.3% from the previous year.
NABOR President Don McNaughton, the executive broker at McNaughton Real Estate in Fayetteville, said a “booming” national economy, strong consumer confidence and low interest rates all factored into another robust year for the regional housing market. He cautioned, however, that any number of factors could negatively impact the market in 2020, including the coronavirus, Brexit, government and corporate debt levels or terrorist attacks.
“If these kinds of disrupters don’t cause any upsets, the 2020 market looks very promising,” McNaughton said
Benton and Washington counties both saw an uptick in year-over-year activity to close out 2019.
Benton County reported 562 home sales worth a combined $151.58 million in December. That compares with 454 and $111.13 million in the year-ago period.
In Washington County, agents sold 320 homes in December—up from 235 in the same month of 2018—with a cumulative value of $76.74 million, up from $53.60 million.
The regional housing market is mirroring a trend throughout the rest of the country — lack of inventory.
According to the 2020 National Housing Forecast from Realtor.com, the national housing shortage will continue in 2020, possibly reaching “a historic low level.”
“Real estate fundamentals remain entangled in a lattice of continuing demand, tight supply and disciplined financial underwriting,” Realtor.com senior economist George Ratiu wrote in the report. “Accordingly, 2020 will prove to be the most challenging year for buyers, not because of what they can afford, but rather what they can find.”
According to Lawrence Yun, chief economist for the National Association of Realtors (NAR), the state of housing in 2020 will depend on whether home builders bring more affordable homes to the market. Nationally, NAR reported an 8.5% decline in inventories year-over-year.
“Home prices and even rents are increasing too rapidly, and more inventory would help correct the problem and slow price gains,” Yun said. He also predicted that home sales growth would only rise by around 3% in 2020 because of the shortage of affordable homes.
In Northwest Arkansas, according to the latest data, residential inventory is down 22.3%, from 2,634 properties at the end of 2018 to 2,046 at the end of 2019.
The year-over-year change is most alarming in Benton County, where inventory was down 28.3% at the end of 2019.
“We’re selling more homes than we’ve ever sold, so it stands to reason that inventories would be lower,” said Marcus Necessary, an executive broker with Weichert, Realtors-The Griffin Co. in Bentonville. “Even though we didn’t see the same drop in inventory in 2017 and 2018 as sales grew then. In 2018, we saw a spike in interest rates as well as increases in inventory. Everyone in the real estate business was talking about the market ‘shifting’. A drop in interest rates in 2019 helped erase those inventory gains and stopped most of the talk about a further market shift.”
From the homebuilding side, there doesn’t seem to be an immediate response to the demand. Activity was down in 2019 in three of the region’s four largest cities and slipped 5.9% overall.
“Land is valuable [expensive], so developers almost can’t afford to build smaller homes on it and make it worth their investment,” McNaughton said. “In starter home prices, I’d say less than $200,000, we are pretty close to a crisis point. The first-time homebuyer is often competing with investors’ offers, and it’s making the situation more challenging for them.”