Skyline Report: Building Permits Highest Recorded Since 2006
FAYETTEVILLE, Ark. (March 5, 2019) – Arvest Bank today released Skyline Reports on residential and multifamily real estate in Northwest Arkansas for the second half of 2018.
The number of building permits issued for new home construction increased 7.0 percent over the same period from 2017, from 1,434 to 1,534. When added to the 1,804 permits issued in the first half of 2018, there were 3,338 building permits issued in the region for all of 2018, the highest total since 2006. The number of building permits issued rose 41.8 percent in Fayetteville, 32.0 percent in Siloam Springs, and 24.8 percent in Bentonville. The number fell 54.0 percent in Springdale, and 4.2 percent in Rogers.
The average sales price of homes also rose from the second half of 2017. The average price of a home sold in Benton County rose 7.1 percent year-over-year, from $228,310 to $244,478. In Washington County, the average sales price rose 4.0 percent, from $219,876 to $228,681.
Slightly fewer newly constructed homes became occupied during the period, falling from 1,488 in the second half of 2017 to 1,387 in the second half of 2018, a decrease of 6.8 percent. This resulted in the number of complete but unoccupied homes more than doubling, from 238 in the second half of 2017 to 524 in the same period of 2018.
Despite this sharp increase, 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, indicated that the high absorption rate of newly constructed homes over the past several years keeps him from being concerned.
“We consider this increase to be a factor of timing more than shrinking demand for new homes or overbuilding,” Jebaraj said. “With regional unemployment remaining low and population growth continuing, I am confident that the new homes being built will continue to be bought. The market for single-family homes, both new and previously owned, remains strong. In short, homes are being built and bought at a rapid pace despite average prices increasing and interest rates being higher than they were a few years ago.
“One of the main things we will be looking at as we move forward will be home affordability. The median multiple, a gauge of home affordability tied to incomes, continues to go higher. While a healthy median multiple is 2.5, that gauge is 3.1 in Benton County and 3.9 in Washington County. This affordability issue continues to drive more Northwest Arkansas residents to choose to live in multifamily properties where we are seeing significant growth.”
The number and dollar value of multifamily building permits saw significant growth in the second half of 2018, rising from 107 permits valued at $132.3 million in the second half of 2017 to 276 permits valued at $372.9 million in the same period of 2018.
Gene Gates, senior vice president and commercial loan manager with Arvest Bank of Fayetteville, said about the Skyline report, “As the region’s largest bank, we are seeing developers, both of single-family homes and multifamily properties, continue to expand their efforts to meet the housing needs of the market. Also, as the area’s largest mortgage lender, we are helping many of customers get the mortgage loans they need to buy homes throughout the region – both newly constructed and previously owned.”
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.