Average home prices in Northwest Arkansas rose by more than $100,000 over the past five years as the availability of lots declined to the lowest level since 2004, according to a new report on area real estate. Meanwhile, home sales increased to a record high of 9,657 houses in 2019, and apartment vacancy rates increased to 4.9%.
Fayetteville-chartered Arvest Bank on Tuesday (March 10) released the semiannual Skyline Reports on residential and multifamily real estate in Northwest Arkansas for the second half of 2019. Arvest Bank sponsors the reports that are completed by the Center for Business and Economic Research (CBER) in the Sam M. Walton College of Business at the University of Arkansas. The bank also releases a semiannual Skyline Report for commercial real estate, which is expected to be released in the coming weeks.
In the second half of 2019, home sales in Northwest Arkansas rose to a record of 4,910 houses, up from 4,747 in the first half of 2019. For the year, home sales reached a record of 9,657.
The average home sales price in Northwest Arkansas has increased by 38.6%, or more than $100,000, from $273,676 in the second half of 2014 to $379,342 in the second half of 2019.
Over the same period, the number of residential building permits that were issued rose 77.1% to 1,856, from 1,048. The five-year trend shows a shift away from the four largest cities in Northwest Arkansas — Fayetteville, Springdale, Rogers and Bentonville — going from 63.5% of building permits issued in those cities in 2014 to 40.4% in 2019.
Also over the same period, the supply of available lots for building new homes in active neighborhoods in the region has fallen 61.7% to 23.3 months, the lowest supply amount since the Skyline Report was first completed in 2004. The supply is a measure of the existing pace of absorption for newly constructed homes, and active subdivisions are those in which some form of construction is taking place.
CBER Director Mervin Jebaraj said the report is a continuation of the past several residential Skyline Reports.
“The residential market in the region continues to demonstrate strength in its ability to absorb a large amount of newly constructed homes,” he said. “At the same time, the number of existing homes listed for sale has declined steadily over the past five years. The bottom line is that there continues to be a strong demand for homes throughout Northwest Arkansas.
“On the supply side, building permits are up more than 20% year-over-year and more than 77% over the past five years. So, in the short-term builders and developers seem poised to meet the strong demand. It will be interesting to see how many new developments will become active in order to meet future demand as the current supply of lots for future building has fallen to its lowest level since the Skyline Report began.”
Jebaraj doesn’t foresee the lot shortage trend to come to an end in the short-term, and the rise in home prices can be attributed to the decline in lots on which to build new houses. The limited availability of lots for homes has led people to look to apartments for a place to live.
The multifamily report shows vacancy rates in Northwest Arkansas rose from 3.5% to 4.9% as a result of several large developments being completed, including in Bentonville and Fayetteville, where the vacancy rates increased to 8.5% and 5.6%, respectively. The vacancy rates in Rogers, Springdale and Siloam Springs were all below 2.5%.
Jebaraj wasn’t concerned with the higher vacancy rates in Bentonville and Fayetteville because the rise is likely a result of the timing of when the new developments opened. The number of multifamily building permits issued in 2019 fell 47.8% to 144, from 276 in 2018, and the total value of those permits declined 3.7% to $359 million in 2019, from $372.9 million in 2018.
Apartment rent prices have risen 28% to over the past five years, or about 5% annually, Jebaraj said. The average rent price rose to $715.84 per month in the second half of 2019, from $674.65 in the second half of 2018. Demand for apartments has been strong, while the availability of homes has been tight. The rise in rent prices can be attributed to the demand and that apartments are being built with nicer amenities.
In a Monday (March 9) media event marking the 15th year of the report, Arvest executives explained its history and how it came to be when it was developed in 2003. Mark Ryan, loan manager for Arvest Bank of Benton County, said he was a loan manager in Rogers at that time, and the bank wanted to develop a report to be able to drill down on analysis of the real estate market. The first report was completed internally in 2004, and the bank started to release it to the media in 2005.
Craig Shy, loan manager for Arvest Bank in Fayetteville, said the report was initially released quarterly, but after the imbalance in the housing market became balanced, the report started to be released semiannually. Shy also said that customers who want to drill down into the data of the reports can come to speak to an Arvest banker.
Jason Kincy, marketing director for Arvest Bank, said the reports help people to make good decisions in the market and are provided factually. They used to be released as three separate reports but are now released as two: a commercial real estate report and the residential and multifamily real estate reports. Jebaraj said the residential report is the largest of the three.
“This report indicating a record number of homes sold in 2019 isn’t surprising to our mortgage lending team across the region,” said Chris Thornton, executive vice president and loan manager with Arvest Bank of Springdale. “As the largest home lender in the area, we also had a record-breaking year in the number of mortgages originated. Looking ahead, we will be working and consulting with our real estate development partners to ensure they can continue to meet the current and future demand for homes while maintaining a healthy balance in the market.”