Proper Planning Key for Cities, Economy (Stephen Davis Market Forecast)
by March 26, 2007 12:00 am 70 views
The Northwest Arkansas real estate market remains strong despite the slowing of real estate sales.
Confidence in the regional economic prospects remains strong as we go through this market adjustment. Our region remains a growth center for the U.S.
Let’s examine actual residential real estate sales recorded in the Washington County Assessor’s office for the years 2002 to 2006 for improved parcel sales in Fayetteville.
It would appear that most of the apprehension associated with the current market is that it follows two very robust markets that registered 18 percent and 22 percent growth rates over the previous year.
The year 2006 was “down” from 2005 but was still a better year than 2004. Another measure to examine is average number of days on the market.
In data provided by the Arkansas Regional Multiple Listing Service, the average days-on-the-market for homes in 2005 was 120 and for 2006 it was 114.
This measure would indicate a healthy market for completed units in Fayetteville. Similar data is available for the other cities in Northwest Arkansas.
The emphasis from various elected officials in our region as well as economic development organizations is for more work force housing options.
The target price range for this type of housing is less that $150,000.
It should be recognized by both the development community and the municipal regulators that each must work with the other to develop actual products that meet the elected official policy goal and meet the business model requirement of private companies.
All is not rosy nor is everything gloomy. The Skyline Report sponsored by Arvest Bank Group Inc. and prepared by the University of Arkansas’ Center for Business and Economic Research provided a snapshot of regional lot availability as of the end of 2006.
This report was published in February and states, in part, the region continues to maintain about a 47 month inventory of available lots, at current absorption rates, with enough additional lots in the approval pipeline to increase this backlog to approximately 115 months.
These are significant inventory backlog numbers that should provide motivation for all parties involved in real estate development to begin implementing strategies that ensure all weather this market adjustment.
Each private company involved in the real estate development market should take the necessary steps to ensure continued viability for this current market phase.
Key points that should be kept in mind include:
The cities and utility districts in our region have a role to play in this process as well by providing a clear statement of the community goals and objectives and taking the necessary steps to ensure adequate infrastructure exists to meet the demands of the current and future population.
The private market can best respond to the normal business cycles when the rules are fairly constant.
A clear and current statement of the community’s goals lessens the business risk in meeting these stated goals.
Each city in Northwest Arkansas has its own distinct characteristics, strengths and weaknesses.
Each community, large or small, should take the time and invest the effort to determine its community’s goals and develop strategies to ensure that community goals can be and are implemented.
In January, a number of new mayors in our region began serving their initial term of office.
A consistent theme was the desire for better planning.
For a number of cities, this translates into development of a master land use plan that can be used to measure each proposed development to determine it’s suitability for their community.
The Arkansas Municipal League in its January 2007 issue of City & Town Magazine provided a very good overview of the statutory authority for cities and towns to develop land use plans.
This article was written by Jim von Tungeln, a planning consultant to the Arkansas Municipal League.
In it, von Tungeln pointed out some of the pitfalls of not having a comprehensive land use plan or operating under an outdated plan and sums up the essence of the article by stating “First [cities] plan, and then [cities] regulate.”
A good example of how cities and developers need to communicate and work with each other is occurring now with a development that has been presented to the city of Greenland for approval.
The development will double the number of dwelling units in Greenland, and the developer has proposed to use a decentralized sewer system for wastewater treatment.
Because the development is near the west fork of the White River, the mayor of Greenland has expressed concerns over the appropriateness of a decentralized wastewater treatment system (much like a septic system) rather than utilizing the publicly owned sanitary sewer system.
This project has been through several meetings. For developers, time is money.
For Greenland, accepting a development on a decentralized sewer system translates into the risk of major public expense in the future to either clean-up a malfunctioning sewer or requiring a future public investment to connect to a publicly owned sewer.
The developer, knowing the critical issue for Greenland and addressing it, might have smoothed the approval process with Greenland.
Cities in Northwest Arkansas have an excellent resource is the Northwest Arkansas Regional Planning Commission, which can assist each city in evaluating their land use plan to determine if these plans meet the statutory test for use in regulation of development or if the plan needs to be updated.
The second phase in the cities arena is the provision of infrastructure.
Ensuring adequate and appropriate infrastructure is in place to accommodate the anticipated new population is a primary duty for municipal governments in the protection of health and public safety.
In addition to the public investment in infrastructure, private development contributed at least $35 million to the larger cities along Interstate 540 in 2006.
Cities should also be concerned about maintaining cash flow and available revenues to meet current operating expenses during any real estate market adjustment period.
Significant amounts of sales tax revenues are generated for each city and county treasury through the sale of building materials.
As construction activity fluctuates the revenues to meet municipal obligations fluctuate as well.
Cities and utility districts need to know their core community goals and objectives and have current comprehensive plans that are clearly stated.
Private developers and builders need to know the core goal for their company and plan for adequate cash reserves to meet business objectives regardless of the business cycle.
(Steve Davis, the former finance director for the City of Fayetteville, owns Davis Business Planning, a consulting service for municipalities and businesses. He may be reached at 479-225-2106.)