Housing shortages, inflation and higher-educated workforce still challenge Northwest Arkansas
Northwest Arkansas grew its population by 4.8% during the pandemic and brief 2020 recession. The unemployment rate averaged 2.9% and average annual wages grew 8.4% over the prior two-year period, according to the State of the Region report from the Northwest Arkansas Council and the University of Arkansas.
The region ranked ahead of most of its peer metros for the lowest unemployment rate, population growth and shortest commute times. But the region remains near the bottom in other metrics such as average annual wages, percentage of adults without bachelor’s degrees and expenditures on research and development. The region continues to have among the highest average airfare of the cohorts at $392. Only Madison, Wisc., had a higher average airfare at $395 last year. Only Durham, N.C., had a lower average median household income of $71,601 compared to Northwest Arkansas at $71,767.
Nelson Peacock, CEO of the Northwest Arkansas Council, said the metrics of affordable housing, a higher-educated workforce and more R&D investments were strategic areas the Council is working on. He said the median wage growth will not continue to grow to that of the peer regions unless more college-educated people move to the region or those already living here improve their education.
Affordable housing and managing urban sprawl were central topics of discussion at the Thursday luncheon (Oct. 27) held at the Hilton Garden Inn in Fayetteville.
Rick Cole, executive director of the Congress of New Urbanism, a nonprofit focused on building walkable cities, spoke on the importance of urban planning in areas like Northwest Arkansas, where growth is outpacing infrastructure. Cole said Northwest Arkansas is at an inflection point, and hard choices need to be made to ensure the region does not sprawl into one major traffic nightmare from Fayetteville to Bella Vista. He said communities need to work together to plan their growth to include more walkable communities and provide more housing options for all income levels. There are projects like that underway in western Rogers, downtown Rogers and south Fayetteville. Peacock said more are needed.
“In 10 to 20 years, this region will reach a million population, and if you spread them over this landscape like peanut butter, I think you will regret it. The future will get here faster than you think,” Cole said.
Mervin Jebaraj, an economist and director of the UA Center for Business & Economic Research, said the region is growing by roughly 12,000 a year, with about 70% of the population moving here and the rest being born here. He also said cities must plan for growth which is critical to helping fuel the region’s economic advancement.
Jebaraj said the regional housing shortage continued as people kept moving to the region amid the pandemic, and fewer houses and apartments were being built. He said vacancy rates remain around 1.6% when student housing is factored out. He said the region has added 12,000 apartment units since 2012, not counting another 6,000 units for students.
Housing sales remained strong through September, well above levels of the pre-pandemic years of 2018 and 2019. He said the number of Northwest Arkansas single-home sales peaked at around 6,000 in the second half of 2021 and has since returned to around 5,000 in the first half of 2022. Jebaraj said while home sales have pulled back slightly this fall, home price appreciation remains strong as the supply can’t keep up with the demand. He said homes are still selling despite the highest interest rates in 15 years.
Cole said rising interest rates and higher home prices could put home ownership and college degrees out of reach for more Americans. Peacock said more has to be done to ensure firefighters, teachers, and those who work middle-class jobs in Northwest Arkansas can afford to live in walkable communities if they so choose.
Jebaraj said the nation and the region have managed to stave off recession, but unless consumers pull back spending, the Fed will keep pushing rates higher. He expects the higher interest rates will take effect on consumer budgets by the middle of next year and likely push the country into recession. Jebaraj said if the job market remains robust, the recession could be short-lived or maybe avoided, although that is highly unlikely.