Report: New builds dominate home sales in Northwest Arkansas

Arvest Bank has published the latest Skyline Reports on residential and multifamily real estate in Northwest Arkansas for the latter half of 2023. The bank sponsors the biannual reports completed by the Center for Business and Economic Research (CBER) at the Sam M. Walton College of Business at the University of Arkansas.

In the residential sector, home sales saw a 2.1% decline in the final six months compared to the same period in 2022 and a significant drop of 22.5% compared to the latter half of 2021. Notably, new construction homes accounted for 39.9% of all homes sold, the highest percentage since the inception of the Skyline Report in 2004.

“The increasingly high percentage of new builds indicates a couple of market trends,” said CBER Director Mervin Jebaraj, the lead researcher for the Skyline Report. “One is that current homeowners are less likely to make an in-market move because of higher interest rates, as most people don’t want to replace a 3.5% mortgage with one at 7.0% or higher.

“Secondly, many new home developers offer assistance by paying points that reduce a loan’s interest rate. Some homebuilders might also be helping buyers with other incentives like including appliance packages with new homes.”

A result of that trend is that inventories of existing homes for sale have risen. Two years ago, at the end of 2021, there were 584 homes for sale in the MLS database. That number increased to 1,618 at the end of 2022 and 2,119 at the end of last year, representing a 263% increase.

Jebaraj also discussed the need for regional coordination regarding rezoning along the U.S. Highway 71B corridor.

“With all four major cities in the region having mayoral elections later this year, I hope we use the opportunity to seek public support for re-imagining the 71B corridor to allow transit-oriented denser housing growth closer to the city centers,” he said. “As the region continues to grow population, a coordinated approach to redevelopment among the four big cities would go a long way towards solving many of the housing issues and disruptions from unplanned growth we are experiencing.”

MULTIFAMILY
In the multifamily market, the region’s overall vacancy rate rose from 2.2% a year ago to 3.1% due to 10 new apartment complexes with almost 1,700 new units entering the market. Even with the influx of new rental units, the cost of renting continued to climb, with the average lease rate moving above $1,000 per month for the first time.

“While the multifamily vacancy rate increased, it is still very low nationally,” Jebaraj said. “And with so many new complexes entering the rental market toward the end of the year, it takes some time for new properties to get leased up. I suspect that the vacancy rate today is lower than it was at the end of the year.”

“It is obvious that higher mortgage interest rates are having an impact on the housing market in Northwest Arkansas,” said Gene Gates, executive vice president and loan manager with Arvest Bank in Fayetteville. “At the same time, the region continues to grow in population, and we continue to see a healthy market to help customers with mortgages. We are also working with apartment developers to secure the funding they need.”

For a PDF of the residential report, click here.

For a PDF of the multifamily report, click here.