Historically low interest rates contributed to a rise in home sales in Northwest Arkansas in the second half of 2020 as home inventory levels declined, according to a new real estate report. Meanwhile, the multifamily vacancy rate narrowly increased.
Fayetteville-chartered Arvest Bank released Tuesday (March 2) the Skyline Report for residential and multifamily real estate for Benton and Washington counties for the second half of 2020. The report also included Madison County data, but for comparison purposes, it was not included in the news release. The Center for Business and Economic Research (CBER) in the Sam M. Walton College of Business at the University of Arkansas completes the biannual report.
In the second half of 2020, home sales in Benton and Washington counties rose 16.6% to a record high of 5,726, from 4,910 in the same period in 2019. Since 2015, sales have risen by 34.5%. The sales number from the 2019 period also was a record high. The 2020 sales number included 1,465 newly constructed homes, another record. The number of newly constructed homes has increased by 71.3% from 2015.
The strong home sales volume in the second half of 2020 led home inventories to fall by 61% to a record low of 707, from 1,812 in the same period in 2019. The number of complete but unoccupied new homes fell by 20.9% to 245, from 310. The declining inventory levels resulted in a record low average number of days on the market for a home of less than 90 days.
The average price of homes in Washington and Benton counties rose to new highs and at a faster pace than in previous years. In Benton County, the prices increased by 10.7% to $293,403 and were 41.8% higher than from five years ago. In Washington County, the prices rose by 11.8% to $268,987 and were 42.5% higher than five years ago. In Northwest Arkansas, the average price of homes listed for sale on the MLS database has risen by 30.6% to $390,641 in the second half of 2020, from $299,083 in the same period in 2015.
“The residential real estate market in the region is very strong right now, but the balance between supply and demand has certainly tipped in favor of sellers for the time being,” said CBER Director Mervin Jebaraj. “Thankfully, it appears that home builders are seeing the need for more supply and are reacting as the number of new building permits issued hit its highest level since the first half of 2006. Buyers are motivated by low mortgage interest rates, but those low rates are being somewhat offset by accelerating home prices.”
While not in the news release, data in the report included Madison County for the first time. In the second half of the year, 2,074 building permits were issued in Benton, Madison and Washington counties. Benton County accounted for 1,514, Madison County accounted for 44 and Washington County accounted for 516. The 2,030 building permits issued for Benton and Washington counties was the highest number since the first half of 2006 when 3,265 permits were issued. Since 2015, the number of permits issued has risen by 69.7%.
Across the three-county area are 23,799 lots in 420 active subdivisions that are included in the report. In the second half of 2020, 2,207 new homes in the subdivisions became occupied, up 50.6% from 1,465 in the same period in 2019.
Benton and Washington counties had the most absorbed lots since the inception of the Skyline Report in 2004, with 1,265 and 903, respectively, the report shows. Based on the absorption rate, the active subdivisions in the two-county area had 17.1 months of remaining lot supply at the end of 2020. Including Madison County, the remaining lot supply was 17.6 months in Northwest Arkansas. An additional 12,756 residential lots have received preliminary or final approval in Northwest Arkansas. Adding these proposed lots to those in active subdivisions would result in 58.8 months of remaining lot inventory.
Assessors’ data shows 64.5% of homes in Benton County and 61.7% in Washington County are owner-occupied. That number is 100% for Madison County, but some rentals might not be included, according to the report.
Northwest Arkansas home sales, including Madison County, were 5,803 homes in the second half of 2020. The average home sales price was $208,285 in Madison County. Homes were on the market for an average of 77 in the county. As of Dec. 31, 731 homes were listed for sale in the MLS database with an average list price of $386,108.
In the multifamily market, vacancy rates rose from 4.8% in the second half of 2019 to 5% in the same period in 2020. The vacancy rate in Fayetteville, Springdale and Siloam Springs declined but was offset by increases in Bentonville and Rogers. In those two cities, a large number of new units entered the market but were not fully absorbed, according to the report.
Average monthly lease rate for multifamily housing in Northwest Arkansas increased by 1.5% to $741.36 in the second half of 2020, from $729.82 in the first half of 2020. Over the same period, the value of multifamily building permits declined by 32.6% to $324.1 million, from $481.5 million, which was a record high.
“Our mortgage division certainly has felt the record sales that this report highlights as they had a record year for home loan volumes,” said Johneese Adams, senior vice president and mortgage manager with Arvest Bank of Fayetteville. “We are also very busy working with our home builder customers as they try to increase supply in the market by ramping up construction to meet the strong demand.”
Arvest sponsors the Skyline Report. In 2004, the bank contracted with CBER to collect information about area real estate markets. CBER researchers aggregated and analyzed data from area governments, property managers, visual inspections and the business media to provide a complete picture of the status of property markets in the two counties.