Home sales in Northwest Arkansas exceeded the previous record by more than 200 homes as surging prices look to impact affordability of the region compared to other metro areas, according to a new real estate report.
Fayetteville-chartered Arvest Bank released Tuesday (March 15) the Skyline Reports on residential and multifamily real estate in Northwest Arkansas for the second half of 2021. The Center for Business and Economic Research (CBER) in the Sam M. Walton College of Business at the University of Arkansas has completed the biannual reports since 2004.
In the second half of 2021, home sales in Benton and Washington counties rose to 5,934, exceeding the previous high of 5,726 in the second half of 2020. Over the same period, average home prices increased by 17.8% in Benton County and 15.8% in Washington County. Over the past five years, the average prices have risen by 55.6% and 54.5%, respectively.
CBER researchers have raised concerns about whether Northwest Arkansas can maintain its reputation of offering a lower cost of living compared to other metro areas if the pricing trends are not mitigated, according to a news release.
“Northwest Arkansas has been able to effectively compete against areas like Austin, Texas, and Seattle because of our lower cost of living, but housing costs are the primary driver of that advantage,” said CBER Director Mervin Jebaraj. “We believe it is imperative that the major cities in the region accelerate efforts to address zoning and other issues impacting the ability for developers to build along the (Interstate 49) corridor. While regional efforts have begun toward this goal, we hope to see results of these efforts sooner rather than later.”
According to the report, new home construction has risen significantly over the past year, with housing starts and homes under construction rising by 40.7% to 1,933 in the second half of 2021, from 1,374 in the same period in 2020. As of Dec. 31, the MLS database had only 584 houses listed for sale, the lowest number of listed homes since 2009. Average list price was $579,089.
“Even with higher costs for materials and manpower, the pace of development is increasing to meet the increased demand, but the area will need even more homes constructed to keep pace with population growth,” Jebaraj said.
According to the 2020 Census, the population of the Northwest Arkansas metro area increased by about 2% to 546,725, from 536,120 in 2019. Since 2010, the population has risen by 24.2%, from 440,121.
To accommodate the population growth, the multifamily market added 4,400 new rental units over the past year, according to the report. Meanwhile, the average lease price for a multifamily unit has risen by 6.4% to $789.06, from $741.36. Over the same period, the overall vacancy rate has fallen to 3%, from 5%. The value of multifamily building permits issued rose by 6.1% to $216.9 million in the second half of 2021, from $204.5 million in the first half of 2021.
“The Skyline data continues to support the idea that residential and multifamily development is needed throughout the region, and we are working closely with our real estate development customers to provide the expertise and capital they need to build housing to meet the demand of the area’s growth,” said Chris Thornton, loan manager for Arvest Bank of Springdale. “At the same time, our mortgage division is busy making home loans accessible to our mortgage customers online, through our innovative Home4Me app, and in person.”