Inventory of Bank-Owned Property Slightly Reduced (Opinion)

The focus of this article is the residential sector of the real estate market in Benton and Washington counties. Specifically, it covers properties sold by financial institutions and properties reverting to financial institution ownership.

In Q4 2010, our research supports that financial institutions sold 16 new single-family homes in active subdivisions in Washington County.

The average price per square foot of living area was calculated to be $71.46.

This average per-square-foot price was lower than in each of the previous three quarters, and the number of sales represented a decline from Q3 2010 (29 sales) and Q2 2010 (36 sales), and only a slight increase from Q1 2010 (15 sales).

In Q4 2010, excluding bank and bulk sales, the number of new home sales in active subdivisions in Washington County totaled 50, with an average price per square foot of living area of $103.96.

From this it can be inferred that in Q4 2010, the average discount indicated on sales by financial institutions of new homes in active subdivisions in Washington County was approximately 31.3 percent ($103.96 – $71.46 = $32.50 ÷ $103.96).

In Q4 2010 in Benton County, our research supports that financial institutions sold 12 new single-family homes in active subdivisions. This was slightly more than in Q3 2010 (eight sales) but fewer than in Q2 2010 (29 sales) and Q1 2010 (14 sales).

The average price per square foot of living area for the Q4 2010 new home sales by financial institutions was calculated to be $66.39.

This, too, was lower than in each of the previous three quarters. Excluding bank and bulk sales, there were 72 new home sales in active subdivisions in Benton County in Q4 2010. The average price per square foot of living area was calculated to be $103.81.

The average discount indicated in Benton County in Q4 2010 on new home sales in active subdivisions by financial institutions was approximately 36 percent.

With respect to new homes in active subdivisions reverting to bank property holdings in Q4 2010, our research supports there were three in Washington County and five in Benton County.

Residential lot sales in active and final platted subdivisions also are considered in this article.

In Q4 2010 in Washington County, 64.8 percent (59 lots) of the total 91 lot sales were from financial institutions.

The average price discount was approximately 18.5 percent.

In Q4 2010 in Benton County, total lot sales numbered 133. Of these total lot sales, 16 were from financial institutions.

This represents approximately 12 percent of the total number of lot sales. The average price discount in Benton County in Q4 2010 was approximately 53.7 percent.

Residential lots in active and final platted subdivisions reverting to bank property holdings in Q4 2010 numbered 321 in Washington County and four in Benton County.

Lots sold by financial institutions in 2010 represented approximately 42.3 percent of total lot sales for the year. This compares to approximately 44.9 percent in 2009.

In conclusion, it is obvious the residential sector still faces problems in working through the inventory of bank-owned properties. Progress, however, is being made.

Looking at 2010 compared to 2009, new dwelling reversions (single-family and duplex in active subdivisions) to bank property holdings were down 12.3 percent, while lot reversions were down 43 percent.

New dwelling sales (single-family and duplex in active subdivisions) by financial institutions were down 27.2 percent, while lot sales were down 29.1 percent.

We remain in a positive interest-rate environment and non-farm employment appears to be slowly improving. This should help financial institutions continue to reduce their level of residential real estate holdings. 

Tom Reed is a partner in Streetsmart NWA, which produces quarterly reports pertaining to the residential, multi-family, and commercial sectors of the real estate market.

Company offices area located at 2804 Main Drive, Suite C, Fayetteville, Arkansas. The phone number is (479) 575-9100.