Arvest Bank recently released Skyline Reports on residential and multifamily real estate in Northwest Arkansas for the first half of 2021.
In this edition of the report, low inventories and rising prices indicate a red-hot market straining to keep pace with job and population growth trends. The number of complete but unoccupied new homes for sale at the end of June was 154, the lowest level since 2012, while the number of homes listed for sale on MLS was 607, the lowest level since 2009. At the same time, the vacancy rate for apartments fell in all major cities in the region, with the overall vacancy rate at just 3.4%.
Combine this constrained supply of housing units with high demand and prices are increasing faster than wages. The average sales price of homes in Benton and Washington counties rose 16.2% from the first half of 2020, moving from $263,461 to $306,236. Five years ago, the average sales price for a home was $212,323, yielding a five-year increase of 44.2%.
The average price to lease an apartment rose 5.4% from the first half of 2020, moving from $729.42 to $768.48, and has risen 26.4% since 2016, when the average lease was $608.05.
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 is concern long-term about housing affordability in the region.
“There are several reasons why the Northwest Arkansas region is ranked so highly in national surveys of the best places to live and housing affordability is one of the key factors,” he said. “As a region, we need to address the fact that housing costs are rising faster than incomes. The housing market nationwide is experiencing many of these same factors, but in Northwest Arkansas we are seeing these factors reach a very rapid pace. Changing local zoning rules could help address the issue of accelerating land costs, which play a significant role in driving higher home prices.
“Looking at the pipeline of future housing, it’s good to see a significant increase in building permits issued, but the supply of available lots for new home construction is at its lowest level since we began measuring this in the Skyline Report in 2005. For those who cannot find a home suitable for their specific situation to buy, they are moving into multifamily developments where vacancy rates are at historically low levels even with so many new units entering the market over the past few years.”
In the multifamily market, vacancy rates across the region fell to 3.4% from 5.0% in the second half of 2020 and from 4.8% in the first half of 2020. The vacancy rate dropped in all primary cities in the region.
Chris Thornton, loan manager for Arvest in Springdale, said about the Skyline report, “The housing market in Northwest Arkansas has certainly been moving at a brisk pace, especially with the average time on market for a home dipping below 90 days. It has required quick action from our mortgage lenders to get customers into homes. We are also working and consulting with real estate developers to get more new homes into the market and that is reflected in the high number of building permits being issued in the first half of the year. In the coming months, we will continue to work with our retail customers buying homes and with developers in getting new residential and multifamily developments into the market so the region can meet the housing needs of our growing region.”
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.