Home sales declined by double digits in the second half of 2022 in Northwest Arkansas, while inventory rose by triple digits, according to a real estate report. Meanwhile, home price growth moderated for the first time in several years.
Fayetteville-chartered Arvest Bank released Tuesday (March 14) the Skyline Reports on residential and multifamily real estate in Northwest Arkansas that shows home sales fell by 20.8% to 4,774 in the second half of 2022 from 6,038 in the same period in 2021. Over the same period, home inventory rose by 177% to 1,618 from 584.
In Benton County, average home prices declined by 0.5% to $401,875 in the second half of 2022 from $403,829 in the first half of the year. Still, prices rose by 16.3% from $345,517 in the second half of 2021. In Washington County, the prices rose by 3.6% to $376,018 from $362,924 in the first half of 2022. Prices increased by 20.7% from $311,572 in the second half of 2021.
In the multifamily market, the overall vacancy rate fell to 1.6% from 2.3%. The decline was attributed to Fayetteville’s vacancy rate falling to 1% from 3.5%. The Fayetteville market comprises 47.6% of all multifamily units in Northwest Arkansas. Other cities had slight increases in vacancy rates.
Mervin Jebaraj, director of the Center for Business and Economic Research (CBER) in the Sam M. Walton College of Business at the University of Arkansas, explained that the declining sales, rising inventory and stabilizing prices of homes might help Northwest Arkansas. CBER works with Arvest to complete the Skyline Reports.
“We have been saying for some time that home prices in Northwest Arkansas have needed to stabilize in order for the region to continue to be an attractive and affordable place to call home,” Jebaraj said. “I believe that the leveling of price increases are an opportunity for the market to potentially recalibrate at a more sustainable pace. In fact, it would likely be beneficial long-term if more developers took this as an opportunity to focus on building in the more affordable price ranges, which would mean further downward motion on average home prices.
“The multifamily market in the region is still operating at a functional vacancy rate of zero, but there are a large number of new developments in the pipeline which are greatly needed,” Jebaraj added. “At the end of the day, we need to have housing, whether that’s homes or apartments that are affordable for those moving into the region.”
According to the Skyline Report, the number of home building permits that were issued in the second half of 2022 declined by 26.9% to 2,115 from 2,892 in the first half of the year. The number also was down by 15.1% from 2,490 in the second half of 2021. The average home permit value fell narrowly to $322,344 from $322,482 in the first half of the year.
In the second half of 2022, there were 122 multifamily building permits issued for 21 apartment complexes. Total value of the permits was $333.1 million, down slightly from the $371.8 million in permits issued in the first half of the year.
Average apartment rent rose by 7.6% to $926.55 in the second half of 2022 from $860.97 in the first half of the year. The average two-bedroom apartment at 952 square feet was $980.27 per month, the report shows.
Maria Lau, senior vice president and mortgage loan manager with Arvest Bank of Benton County, noted that the higher interest rates have led to fewer customers seeking mortgages.
“This report on the real estate market in the second half of last year is not surprising,” she said. “We feel that home prices stabilizing and inventory growing will likely encourage more people into the market again. One of our main focuses will be to help customers who have been in apartment homes make the jump to owning now that more homes are for sale and price increases have slowed.”
For a PDF of the multifamily report, click here.
For a PDF of the residential report, click here.