Looking and planning ahead

The housing situation in Northwest Arkansas has been discussed and reported on for years. Over the past four to five years, the primary focus has been affordability and availability as prices for homes and apartments have increased significantly while supply has been tight.

As most readers of this publication know, Arvest has been sponsoring the Arvest Skyline Report for 20 years. This in-depth report from the Center for Business and Economic Research at the Sam M. Walton College of Business at the University of Arkansas takes a deep dive into the region’s residential, multifamily and commercial real estate market. These reports show current conditions.

While this is beneficial for making decisions today, it is also important for the region to look ahead and plan. To answer a few critical questions like:

• Can housing affordability become an issue that limits future growth?
• What role do city and county governments have in sustainable housing growth?
• As inflation improves, will construction costs stabilize?

From my conversations with customers, here are some thoughts on these questions.

FUTURE GROWTH
Housing affordability is unlikely to significantly impact future growth as the region’s job-creating engine remains strong. The more likely scenario is a continuation of current trends where smaller, outlying communities will absorb most of future housing growth – especially single-family homes.

That is not to discount the housing affordability initiatives being developed in the region, which are already having a positive impact while in the early stages. Most people I speak with expect these programs to grow in the future, but it’s unlikely that these alone will be able to supply the majority of new homes and apartments needed to meet growth expectations.

GOVERNMENT’S ROLE
Local municipal and county governments have an essential role to play. Not only do they influence where housing developments are located through zoning and infrastructure development, but as they embrace the idea of working collaboratively, they also help with transportation issues. Transportation becomes an increasingly important issue as more people move away from their job worksites.

Regional governments also play an important role in facilitating and approving in-fill developments and affordable housing initiatives. If you own or manage a business in the region, I suggest becoming more informed about your city and county planning processes. When more constituents are interested in these issues for the sake of their employees, more is likely to happen, improving affordability.

CONSTRUCTION COSTS
The global pandemic and resulting supply chain issues drove significant increases in construction costs. While rising construction costs were felt everywhere, the impact in fast-growing areas was felt even more, making a challenging environment even more difficult.

The good news is that construction costs are projected to stabilize in 2024. JLL Research, a real estate consultancy, estimates construction costs to increase by 2% to 4% this year. Many homebuilders and developers we work with confirm that the rapid increases of the past are improving. However, they caution that workforce issues could mean a slightly higher increase here.

As Northwest Arkansas continues to grow, we must work to ensure that new residents have accessible and affordable housing. Our low cost of living has been one of the major selling points that has fueled our growth. Banks, developers, homebuilders and governments must work together to maintain that selling point.

Kelly Carlson is the loan manager for Arvest Benton County. The opinions expressed are those of the author.