Housing demand remains strong in Northwest Arkansas while builders are scaling back on new construction, a combination that shows improvement in the residential market oversupply stated by the Skyline Report in previous quarters.
Portions of the report for the second quarter of 2007 were released Monday by Arvest Bank. The bank commissions the study of the real estate market of Benton and Washington counties quarterly from the Center for Business and Economic Research at the Sam M. Walton College of Business. The college is part of the University of Arkansas at Fayetteville.
The second-quarter report covered the residential and multifamily markets for March, April and May.
“It is good news all around,” said Kathy Deck, the research center’s director. “We found it very encouraging that the market showed good, strong absorption.”
Absorption is measured by the number of completed new houses sold during the quarter compared to the number that were completed but did not sell.
The number of complete but unoccupied houses declined 13. 12 percent to 2, 411 at the end of the second quarter of 2007 from the 2, 775 reported at the end of the first quarter.
The number of houses in subdivisions that became occupied during the second quarter of 2007 was 1, 166, a drop of 4. 19 percent from the 1, 217 reported in the first quarter. But it was an increase of 82. 76 percent compared with the 638 reported in the second quarter of 2006.
Building permits for singlefamily homes issued during the second quarter of 2007 fell 56. 31 percent to 744 compared with the 1, 703 issued during the same quarter last year.
The combination of fewer building permits issued and more new houses sold are relieving the inventory buildup of past quarters, Deck said.
The supply of houses and lots in Northwest Arkansas is sufficient for 42. 1 months at current demand, the report stated. At the end of the first quarter, the supply was enough for 49. 9 months’ demand, a reduction of seven months’ demand over three month’s time.
Meza Harris of Lindsey & Associates Inc. in Rogers said the past two months have been very busy for sales.
The multifamily market has seen an increase in the vacancy rates for apartments in the two counties, according to the report.
The vacancy rate during the second quarter of 2007 was 9. 9 percent, up 5. 32 percent over the first-quarter rate of 9. 4 percent. It was up significantly, 32 percent, over the 7. 5 rate reported in the second quarter of 2006.
Roy Stanley, president of Lindsey Management in Fayetteville, said the second quarter of 2006 was a record quarter, making it hard to compare with other years.
Lindsey Management oversees more than 29, 000 apartments in 100 developments in nine states. Systemwide, Stanley said, the company has seen an increase in vacancy rates for the second quarter of 2007 compared with the same quarter of 2006.
Many former renters may be taking advantage of good real estate deals in Northwest Arkansas despite a slight rise in mortgage interest rates, Arvest spokesman Jason Kincy stated in a news release.
“I’m sure that is some of it. But I suspect that financing is harder to get now,” Stanley said.
“This economy is still strong. Maybe not as strong as last year’s in housing sales, but I expect it is still a good investment for most people,” he said. “It is pretty stable over the long haul.”
One real estate market to watch in coming months is the condominium developments, Deck said. Condo projects are permitted as multifamily developments when they are constructed, but once the individual units start to sell, they are counted in the single-family residential market for Skyline purposes, she said. More than 3, 500 new condos are expected to be completed in Fayetteville, Rogers, Siloam Springs and Springdale in the near future and will count as residential inventory. “We are watching those condos,” Deck said. She does not expect the condos to overwhelm any particular price range in the market. “They stretch anywhere from the very starter-home-type prices to the highest prices you can imagine,” she said.