Building Permits Go Up While Lot Supply Drops
FAYETTEVILLE, Ark., (Sept. 29, 2015) — Arvest Bank today released the residential real estate market Skyline Report results for the first half of 2015 in Northwest Arkansas, which noted that the number of building permits increased significantly compared with the number of permits issued in both halves of the last year and that the value of the permits decreased from the average values of 2014. The area also recorded its lowest level of residential lot supply since 2008.
“We’ve seen both demand for new and existing housing increase in Northwest Arkansas,” said Kathy Deck, lead researcher for the Skyline Report at the Center for Business and Economic Research at the Sam M. Walton College of Business, University of Arkansas at Fayetteville. “The increase in the number of building permits is warranted given the type of demand we have for housing right now.”
Residential building permits issued in the first six months of 2015 numbered 1,359, up 14.9 percent from the 1,183 issued during the same period of 2014 and up 29.7 percent from the 1,048 issued between July 1 and December 31, 2014. Benton County accounted for 845 of the residential building permits, while Washington County accounted for 514.
The average value of all building permits in Northwest Arkansas from January through June 2015 was $234,753, down 0.48 percent from the average value of $235,890 reported in the same time period of 2014 and down 5.4 percent from the average value of $248,080 reported from January to June in 2014.
The sold price of existing houses on the market were mixed in Benton and Washington counties compared with the second half of 2014. The average sold price of Benton County homes during the first half of 2015 was $200,326, down 1.5 percent from the average sold price of $203,419 during the second half of 2014. In Washington County, the average price of existing homes sold was $194,654, up 8.9 percent from the average sold price of $178,774 in the second half of 2014.
Home values, as measured by the average cost per square foot of existing homes sold during the first half of 2015, increased by 1.3 percent in Benton County to $89.77 from $88.61 during the second half of 2014. In Washington County, the average cost per square foot of existing homes sold in the first half of 2015 was $93.21, up 4.4 percent from the average cost per square foot of $89.30 reported during the second half of 2014.
In total, 3,769 existing homes were sold in Benton and Washington counties during the first six months of 2015, an increase of 20.7 percent from the 3,122 sold during the same time period of 2014.
Johneese Adams, senior vice president and mortgage loan manager for Arvest Bank in Fayetteville, said that although the overall value of building permits were lower, the increases in price per square foot suggests that builders and buyers are focusing on smaller sized homes that reflect a greater value for the cost.
“Slightly smaller homes with the same types of amenities seen in larger homes may drive down the average value of the building permit but it reflects the added value that people are looking for while shopping for a home now,” Adams said. “Since our mortgage division has already surpassed $1 billion in new and refinanced loans this year for the 13th year in a row, the evidence shows that home buying is not slowing but is actually growing as mortgage rates remain relatively low and rental property is in short supply.”
Deck said researchers are watching the lot inventory and new plats as they come before area planning agencies. A total of 27,850 lots were in the 381 active subdivisions identified in the Skyline Report during the first half of 2015. Of those lots, 8,324 were classified as empty, 185 were classified as starts, 672 were classified as being under construction, 261 were classified as complete but unoccupied and 18,409 were classified as occupied. OF the previously unoccupied houses, 1,072 became occupied during the first half of 2015, up 2.3 percent from the 1,048 in the second half of 2014.
Using the absorption rate from the past 12 months implies that there is a 53.4 month supply of remaining lots in active subdivisions in Northwest Arkansas, the lowest level since 2008.
“We are not seeing as many subdivisions being platted as we did in the boom,” Deck said. “Those that are being platted are being developed right away, so they don’t linger on the market as empty lots. I think that continued practice will keep the residential market from overheating, even as activity is quite brisk.”
The Arvest Skyline Report is a biannual analysis of the latest commercial, single-family residential and multifamily residential property markets in Benton and Washington counties. The report is sponsored by Arvest Bank and conducted by the Center for Business and Economic Research in the Sam. M. Walton College of Business at the University of Arkansas (CBER).
In 2004, Arvest Bank entered into a contract with CBER to collect information about the local real estate markets. CBER researchers aggregated and analyzed data from local governments, property managers, visual inspections and the business media to provide a complete picture of the status of property markets in the two counties.
The Center for Business and Economic Research at the Sam M. Walton College of Business provides excellence in applied economic and business research to federal, state and local government, as well as to businesses currently operating or those that desire to operate in the state of Arkansas. The center further works to improve the economic opportunities of all Arkansans by conducting policy research in the public interest.