Arvest Bank recently released Skyline Reports on residential and multifamily real estate in Northwest Arkansas for the second half of 2021. The number of homes sold set a new Skyline record despite significantly higher home prices.
In Washington and Benton counties there were 5,934 homes sold, which eclipsed the previous Skyline highwater mark of 5,726 from the second half of 2020. This new record came despite the average price of homes sold increasing over the same timeframe by 17.8% in Benton County and by 15.8% in Washington County. Over the past five years, the average price of a home sold has increased 55.6% in Benton County and 54.5% in Washington County.
Researchers at the Center for Economic and Business Research (CBER) at the Sam M. Walton College of Business at the University of Arkansas voiced concerns about the region’s long-term ability to sustain its reputation as offering a lower cost of living than other metropolitan areas if these trends are not mitigated.
“Northwest Arkansas has been able to effectively compete against areas like Austin, Texas, and Seattle because of our lower cost of living, but housing costs are the primary driver of that advantage,” CBER director Mervin Jebaraj said. “We believe it is imperative that the major cities in the region accelerate efforts to addressing zoning and other issues impacting the ability for developers to build along the I-49 corridor. While regional efforts have begun toward this goal, we hope to see results of these efforts sooner rather than later.”
The pace of new home construction has significantly increased in the past year, as evidenced by the number of housing starts and homes under construction reaching 1,933 in the second half of 2021, compared to 1,374 in the second half of 2020 – a 40.7% increase.
“Even with higher costs for materials and manpower, the pace of development is increasing to meet the increased demand, but the area will need even more homes constructed to keep pace with population growth,” Jebaraj said.
Reflecting the region’s strong demand for housing to accommodate the growing population, the multifamily market added 4,400 new rental units in the past year. Despite this influx of new apartments, the average lease price for a multifamily unit increased 6.4% in the past year and the overall vacancy rate across the region dropped from 3.4% to 3.0%.
“The Skyline data continues to support the idea that residential and multifamily development is needed throughout the region and we are working closely with our real estate development customers to provide the expertise and capital they need to build housing to meet the demand of the area’s growth,” said Chris Thornton, loan manager for Arvest in Springdale. “At the same time, our mortgage division is busy making home loans accessible to our mortgage customers online, through our innovative Home4Me app and in person.”
The Arvest Skyline Report is a semi-annual analysis of the latest commercial, single-family residential and multifamily residential property markets in Benton, Washington, and Madison counties. The report is sponsored by Arvest and conducted by CBER.