Demand Outpaced by Supply In Upscale Residential Market

This article focuses on the upper-end single-family residential market in Benton and Washington counties, in particular, home sales at price levels of $700,000 and above.

Before discussing sales data pertaining to upscale properties, it is important to note the price levels at which the vast majority of residential sales activity is occurring in the two-county area.

Multiple Listing Service data for fourth-quarter 2009 indicate that nearly 80 percent of the home sales in each of Benton County and Washington County were at price points below $225,000. This price point indicator has continued to hold true for Washington County for several quarters, varying between 80 percent and 85 percent. In Benton County, until the first quarter of 2009 nearly 80 percent of the home sales had typically been at price points below $250,000.

The price points where the bulk of residential demand lies in Benton and Washington counties are very clear. However, the area continues to experience some demand in the upper-end residential sector as well.

In 2009, our research of property records indicates there were a total of 31 single-family residential sales in active subdivisions in Benton and Washington counties at price points of $700,000 and above. Twenty-three of these sales represented new construction and 8 represented resells. Twenty-five (19 new/6 resells) of the properties are located in Benton County and 6 (4 new/2 resells) are located in Washington County. The new construction sales ranged in price from $722,000 to $2.19 million and in indicated living areas from 3,524 SF to 6,809 SF.

The mean selling price for the new construction was calculated to be $984,391, and the mean price per living area was $192.38 per SF (based on 19 sales for which square footage information was available). With respect to the resold homes in active subdivisions, the 2009 transactions ranged from a low of $700,000 to a high of $1.5 million. The mean sales price was calculated to be $918,500, and the mean price of living area $171.03 per SF (based on 7 sales for which square footage information was available). The resold homes were indicated to range in living area from 3,972 SF to 6,825 SF.

The 2009 demand for upper-end single-family residential property in Benton and Washington counties was consistent with 2008 demand. Our research of property records indicates there were a total of 30 sales of single-family residential properties in active subdivisions in Benton and Washington counties in 2008 at price points of $700,000 and above. Nineteen of the sales represented new construction and 11 represented previously occupied homes. Only 6 (5 new/1 existing) of the sold properties are located in Washington County.

The new construction sales ranged from $700,000 to $2.75 million, with a mean price of $1.06 million. The range in living area was 4,064 SF to 8,470 SF. The mean price per SF of living area, based on 13 sales, was $201.60. The 11 resold homes ranged in price from $715,000 to $1.65 million, with a mean selling price of $903,000. The existing homes ranged in indicated living area square footage from 3,771 SF to 6,145 SF. The mean sales price of living area was $191.86 per SF.

Comparing the two years indicates that the mean price of new construction sales in active subdivisions decreased approximately 7.2 percent between 2008 and 2009, while the mean sales price of existing homes increased about 1.7 percent.

With respect to price per SF of living area, data support that new construction sales and existing homes decreased about 4.6 percent and 10.9 percent, respectively, between 2008 and 2009.

As of the date of preparation of this article, MLS records reflected a total of 157 single-family residential properties offered for sale in Benton and Washington counties at price points of $700,000 and above. About 65 percent of these properties are located in Benton County.

While this includes more than just properties located in active subdivisions, it is safe to say that this sector of the residential market is over-supplied at the present time. 

Tom Reed is a partner in Streetsmart NWA of Fayetteville, which produces reports pertaining to the residential, multi-family, and commercial sectors of the real estate market. He may be reached at 479-575-9100.