Skyline Report: Declining Supply of Available Lots for Residential Construction
FAYETTEVILLE, Ark. (February 27, 2018) – Arvest Bank today released the residential real estate market Skyline Report results for the second half of 2017 in Northwest Arkansas. The report shows a decline in lots available for residential construction.
The absorption rate from the past twelve months in both Benton and Washington counties indicates there is a 27.3-month supply of remaining lots in active subdivisions in Northwest Arkansas. This is down 25.2 percent from the 36.5 months at the end of 2016 and down 53.5 percent from the 58.7 months at the end of 2014.
As the inventory of lots available for construction decreases, the price of the remaining lots increases, which – combined with rising construction costs – is leading to increased home prices across the region. This is particularly true in Washington County where the average sales price of a home increased 9.0 percent during the past twelve months and 23.0 percent during the past three years.
Mervin Jebaraj, lead researcher for the Skyline Report at CBER at the Sam M. Walton College of Business, University of Arkansas at Fayetteville, said of these findings, "The growing scarcity of lots for new home construction, especially in the most desirable areas near amenities, is becoming worrisome. Put simply, we need more available lots added to the pipeline, or we will begin to experience issues with higher home prices affecting housing affordability in the region."
The number of building permits decreased 12.5 percent year-over-year, from 1,638 in the second half of 2016 to 1,434 in the second half of 2017. This decline was most notable in Benton County, which had 804 building permits issued from July 1 to December 31 of 2017, down 22.8 percent from the same period in 2016. The number of building permits issued in Washington County rose slightly year-over-year from 596 in the second half of 2016 to 630 in 2017. However, looking at the previous period, building permits in Washington County were down 14.7 percent moving from 739 in the first half of 2017 to 630 in the second half of the year.
Mark Ryan, executive vice president and loan manager, commenting on the report said, "As we enter the traditional home buying season, we are seeing strong interest from many customers to find the right house in the right area at the right price. This report’s focus on affordability, combined with recent rate increases in mortgage loans will likely lead to strong home buying throughout the area. We want our customers to know that we are prepared to help them get a jump on finding the right home loan."
In the 371 active subdivisions covered by the Skyline Report, there were 1,030 homes under construction, 211 housing starts, 238 houses that were complete but unoccupied and 5,571 empty lots during the second half of 2017.
There are an additional 6,906 residential lots that have received either preliminary or final approval in the two counties. When those are added to the lots from active subdivisions, there is a 54.0-month supply of remaining lots at the current absorption rate. This is the lowest level since the Skyline Report began in 2004.
The Arvest Skyline Report is a biannual analysis of the latest commercial, single-family residential and multi-family 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 (CBER) in the Sam. M. Walton College of Business at the University of Arkansas.
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 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.