Skyline Report: Home Prices on the Rise as Lot Inventory Remains Low
FAYETTEVILLE, Ark. (Oct. 9, 2018) – Arvest Bank has released Skyline Reports on residential and multifamily real estate in Northwest Arkansas for the first half of 2018.
During the first half of this year, the average price for homes sold continued to rise and reached record highs in both Benton and Washington counties. The increase in Washington County from the first half of 2017 to 2018 was especially significant at 12.3 percent, moving from $209,899 to $235,618. In Benton County the increase was 4.9 percent, moving from $227,036 to $238,098.
Looking at five-year trends, the average price of homes sold in Washington County has increased from $173,979 in the first half of 2013 to $235,618 in the first half of this year – an increase of 35.4 percent, which is an average annual increase of 7.08 percent. In Benton County the average price of homes sold in the first half of 2013 was $185,500 compared to $238,098 this year – an increase of 28.4 percent, or 5.68 percent annually.
Homebuying activity remained strong in the first half of 2018 with 4,438 homes being sold in the period, up 1.2 percent from the first half of 2017 when 4,385 homes were sold, and up 45.5 percent from the first half of 2013 when 3,051 were sold.
Mervin Jebaraj, director of the Center for Business and Economic Research (CBER) at the Sam M. Walton College of Business at the University of Arkansas, said there are several factors contributing to the rising prices, including labor and material costs and the shrinking supply of available lots on which to build new homes. The supply of remaining lots in active subdivisions, based upon the previous 12-month absorption rate, was 29.6 months in the first half of 2018, up slightly from 28.9 months in the first half of 2017 and down significantly from 94.3 months in the first half of 2013.
“Affordability is becoming an issue in the residential real estate market in Northwest Arkansas as the increase in home prices significantly outpaces both wage growth and inflation,” Jebaraj said. “With our population expected to continue to grow at a rapid pace, we need to continue building new homes to meet demand, but there are far fewer lots on which to build new homes. This is especially true within the larger cities in the region where many people desire to live.
“What we are seeing in the data is that more and more people are choosing to lease apartments instead of buying homes, because the apartments tend to be closer to the amenities they desire and are considered to be more affordable. This, in turn, is fueling the insatiable growth in the multifamily market, which continues to add new multifamily properties at a rapid pace without any sustained increase in the vacancy rate of those properties.”
The multifamily real estate market in Northwest Arkansas has grown, in terms of total square feet, by 22.8 percent during the past five years – from 19,292,047 total square feet in the first half of 2013 to 23,682,495 in the first half of this year – but the vacancy rate has remained very healthy, falling slightly from 4 percent in the first half of 2013 to 3.9 percent in the same period of 2018. The average lease price for apartments has increased 20.7 percent since the first half of 2013, from $538.34 to $660.80.
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 CBER.
In 2004, Arvest Bank contracted 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.
CBER 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.