Building sector picks up pace in first quarter 2013

Homebuilders and commercial construction crews have more projects under way this year which is a welcome sight for lenders, contract crews, agents and material suppliers.

The residential sector is experiencing the largest gains with 326 new home permits issued in the first quarter of this year. Those permits issued by the region’s four largest cities were valued at nearly $76 million, up 28.8% from a year ago.

Consequently the commercial segment reported more projects with smaller overall valuations. Fayetteville, Springdale, Rogers and Bentonville issued new commercial permits worth $24.59 million in the first quarter of this year. This compared to $40.92 million in the prior-year period, which included a $28 million multifamily project in south Fayetteville in 2012.

RESIDENTIAL RECAP
Statistics show the local new home inventory is low in many price categories, which gives builders the opportunity for a busier summer.

Brent Hanby, co-owner of Encore Flooring and Building Products in Springdale, relies primarily on the residential construction for his livelihood.

“I regularly survey title companies, movers and builders to try and guage their assessment of the local market. Everyone I am talking with is busier these days, with the exception of a few restoration specialists who focus largely on insurance claim jobs from natural disasters. Business is not the crazy pace it was at the market peak but it’s steady with modest improvements these days,” Hanby said recently.

Rogers was the hotspot for new projects in the recent quarter as the city issued 112 new home permits — 43 of those during the month of March. The permits totaled more than $20 million, up from $11.8 million in the first quarter of 2012.

Fayetteville and Springdale also reported more projects in the quarter, while Bentonville builders have applied the brakes in the last few weeks.

New Residential (January through March)
Rogers: permits totaled $20.35 million, up 51.86%
Fayetteville: permits totaled $17.04 million, up 44.28%
Springdale: permits totaled $12.77 million, up 20.9%
Bentonville: permits totaled $25.4 million, up 12.5%

Bentonville issued 91 new residential permits in the first quarter, down from 102 in the year-ago period.

National economists say new home inventories remain stunted amid a growing population which is only going to create more demand in the coming months. Statistics show the local region’s population is growing at about 900 people a month, which will push the metro area population above 500,000 by the summer of 2014. Economists say this population growth is also helping to lift housing demand across Northwest Arkansas.

Benton and Washington counties show roughly 270 new homes listed for sale at the end of March. MountData.com recently reported 181 new home sales in the first three months of 2013 for these two counties.

Linda Marquess, agent with Crye-Leike Realty, sees a robust demand for new homes priced below $150,000. She said the buyers she works with range from young professionals and first time homebuyers to baby boomers looking to downsize. It's not uncommon for her to write 20 contracts a month for new home sales.

Veteran banker Don Gibson, the CEO of Legacy Bank in Springdale, said the majority of the new home demand he has witnessed so far this year is in the custom home market.

Nicki Dou, an agent with Coldwell Banker in Rogers, said she recently represented buyers who relocated here from out of state and after an exhaustive home search the couple opted to build given they could not find what they wanted in the existing home market.

COMMERCIAL SCENE
New commercial projects on tap across the region totaled $24.59 million in the quarter, and includes various lease retail and restaurant space in the Pinnacle Hills Promenade area of western Rogers.   

Mojitos, Slim Chickens and Panda Express are among those restaurants recently making a home in the Promenade area. Other food venues recently leasing new retail space on Promenade Boulevard include Starbucks and Bliss Cupcakes.

In Fayetteville, Panda Express is under construction on Martin Luther King Boulevard, and a new bus stop provided by Ozark Regional Transit Authority will be built at 1801 Diamond Drive. Also in Fayetteville, the Northwest Medical Surgical Center is coming to 137 Van Ashe Loop.

Casey’s General Store continues to expand into Northwest Arkansas, with new convenience stores under construction in Rogers, Springdale and Bella Vista.

GIbson said the commercial demand remains somewhat tepid except for a few smaller projects for owner occupied buildings.

“We are seeing very little demand for speculative commercial building at this time,” Gibson said.

But he added there should be an uptick in demand for multifamily rentals and investment property of single family homes as tighter underwriting guidelines will likely keep a larger percentage of credit-challenged, would-be homeowners parked in rentals for the next few years.

Marquess said she recently sold five brand new homes in the Sunbridge Subdivision – which is near Washington Regional Medical Center in Fayetteville – to the same local investor.

“He bought them before they were finished. These homes are 1,349 square-feet and feature 3 bedrooms, 2 baths and a double-car garage. They have granite countertops and other top-of-the-line features all for a turnkey price of $140,000,” she said. "These homes rent for $1,250 per month."