NWA builders share cautious sentiment despite more permits

As 2012 winds down, veteran builders say it’s been a decent year with plenty of work, but they are proceeding into 2013 with some caution.

The concerns are that the broader economy will slow under larger tax burdens amid federal budget restraints that could stifle small business expansion and overall consumer confidence.

That said, the number of residential permits issued among the five largest cities from Fayetteville to Bentonville in the month of October jumped 67% from the same time last year.

Fayetteville, Rogers and Bentonville each issued at least twice as many new residential permits last month compared to the same time last year. Springdale and Siloam Springs issued a few less permits compared to a year ago.

The cumulative value of the new permits among the cities rose 80.6% to $34.831 million, compared to October 2011.

RESIDENTIAL PERMIT VALUES (October)
Bentonville $15.252 million, up 101%
Fayetteville $8.8 million, up 100%
Rogers $6.729 million, up 204%
Siloam Springs $90,000, down 87.4%
Springdale $3.966 million, down 16.27%

Veteran homebuilder Bill Burckart said permits don’t necessarily equal sales.

“I feel there is still some pent-up demand at certain price points – below $200,000 and between $300,000 and $450,000,” he said. “But I am only building custom homes now in neighborhoods that have been stable or have seen prices increase.”

Burckart said a home he built five years ago in Bentonville’s Lochmoor Club recently sold for $5 more per square foot than it did new, and prices are continuing to rise in stable neighborhoods throughout the city.

Bentonville issued 56 new permits in October, and Burckart said the level of existing bank-owned lots are being depleted, which means there will need to be more development in the next year.

“When the discounted lots are gone, home prices in Bentonville are going to rise sharply. Quite frankly there might not be a better time to buy than the very near term,” he said.

In the next 30 to 60 days, Burckart says he will start a few custom homes in stable neighborhoods, but will proceed cautiously and hopes other builders will do the same as there is still a fair amount of uncertainty in the overall economy.

Sean Morris, general contractor for ARC/Walker Brothers Construction, says 2012 has been steady enough and perhaps a shade better than 2011. He estimates between 80 and 90 new home closings this year, with several resales and a few lot deals in the mix.

The Walker Brothers have wrapped up construction in Persimmon Place in west Fayetteville this year, and are working in five other subdivisions from Fayetteville to Rogers and in Bentonville.

Morris said there is almost no inventory finished and unsold at this point, and he’s down to less than a dozen lots in Fayetteville for new construction.

“There really are no lots to choose from in our price points in Fayetteville. For any new construction there will have to be price increases to the $225,000 range,” he said.

In Rogers, ARC still has about 50% of the Bellview Subdivision to build out, and recently picked up 38 lots in The Groves subdivision near Pleasant Grove Road.

Morris said he has a few pre-sold homes to start in The Groves next month. The price point in this subdivision starts at $199,900 for 2,000 square feet. Larger footprints at 2,300 square feet are also available at a higher cost.

“We also have two custom homes going up in Pinnacle right now. They range from 3,000 to 4,000 square feet. We usually don’t build custom, but these clients happen to be friends and we had the time now to do it,” Morris said.

He said in 2013 his firm will build out the lots it has in Bentonville’s Windwood Phase 5, complete work in Rogers and the few lots left in Fayetteville, while also hoping to secure either lots or raw land to develop for 2014 construction.

COMMERCIAL SLOWS
The commercial building sector across the two counties slowed in October with a handful of new permits issued by the five cities combined. These permits totaled $8.65 million, down 66% from the activity a recorded a year ago.

The 21c Museum Hotel under construction in downtown Bentonville had a $15 million value in the year-ago comparison and a $6 million hospice center in the city was also included in last year’s numbers.

Bentonville did not issue new commercial permits in October of this year.

Springdale had the largest commercial ticket item last month — a 39,000-square-foot warehouse for Chandler Equipment valued at $3.42 million.

In Siloam Springs, Northwest Health System plans to build a physician’s office complex adjacent to the new hospital located on Progress Parkway. This new professional building permit was valued by the city at $2.753 million.

In Rogers, new construction at Pinnacle Hills was valued at $500,000 for Club Tan’s lease space and the McDonald’s at 903 W. Walnut is getting a major overhaul valued at $500,000.

Permit Comparisons (January through October)

Fayetteville

2012: $275.96 million

2011: $103.75 million
166%

Bentonville
2012: $149.942 million
2011: $129.253 million
15.85%

Springdale
2012: $57.858 million
2011: $33.323 million
73.62%

Rogers
2012: $77.829 million
2011: $58.601 million
32.81%

Siloam Springs
2012: $11.789 million
2011: $26.271 million
-55.12%

(Permits are for new construction, additions and remodels are not included.)