Fayetteville Arkansas, University of Arkansas--Old Main Overview

Fayetteville Arkansas, University of Arkansas--Old Main Overview
Overview of Fayetteville, AR

Tuesday, May 16, 2006

Are Home Prices Coming Down? Probably Not, but Future Construction May Be More Affordable

If you are in the market for a big, beautiful home with all the upgrades you can imagine, now is a good time to start some serious shopping. There is a glut of expensive homes available, especially in Bentonville, but also throughout all of Northwest Arkansas.

In the first quarter of 2006, there were 2,084 complete but unoccupied new houses in Benton County. That’s an increase of 160 percent in available complete inventory from the first quarter of 2005, with a 63 percent increase in the most recent quarter alone. Washington County experienced a smaller inventory increase of 71 percent over the past year – still a sizable increase.

Excluding the completed homes, there were 19,206 lots in the 269 active subdivisions in NW Arkansas in the first quarter of 2006. Using the most recent annual absorption rate implies that the supply of remaining lots in NW Arkansas active subdivisions is sufficient for 35.9 months (or 3 years). There were an additional 19,200 residential lots that have been at least preliminarily approved in NW Arkansas communities.

For too long now, builders seemed willing to pay exorbitant prices for land to build new homes, and land speculators did their part to see that prices went consistently up. Hopefully those days are over, at least for the time being.

Builders use a general rule-of-thumb that says the cost of the land should be approximately 20% of the price of the new home. If the builder pays $75,000 for a lot, he will probably build a $350,000 house on it. Thus the asking price will be $425,000. That is a lot of money – far more than the average family can afford.

If the builder can’t sell his new homes in a timely manner, he can easily find himself in financial difficulties. He must continue paying his construction loans whether the homes are selling or not. It doesn’t require a crystal ball to see that the price of lots will have to come down or the homes built on them will stay on the market longer than many builders can tolerate financially. It is also possible that some builders will be forced out of business.

The average homebuyer in this area can easily qualify for a $100,000 home – but there are few available. Even if he qualifies for a $150,000 home, the selection is extremely limited, mostly older re-sale homes. Smaller, more affordable homes sell more quickly. The American dream of owning your own home is not yet dead, but it is seriously ill in NW Arkansas. Builders must cut back on 3,000 sq. ft. homes with every amenity a person can think of and start building what people can afford to buy. And there is some evidence that this trend might be starting.

In looking at the various reports and accompanying statistics that cross my desk every week, I’m beginning to see some signs that cut back may be beginning. One of these indicators is a -1.7% change in building permit values. While economists might see this as a "negative", I see this as a positive thing. With the glut of expensive homes on the market, a negative value here could possibly reflect the necessary adjustment for building more modestly priced homes in the near future.

Another indicator shows that construction employment in the area increased by 1.1%, which might indicate more construction is under way. Taken together, these statistics tell me that construction is increasing, but the value of what is being built is less—not altogether a bad thing from the point of view of affordability.

For more information:



Thursday, May 11, 2006

Beaver Lake is Rising but Water Conservation Still in Effect in Bentonville and Rogers

Northwest Arkansas has received several inches of much needed rain in the past couple of weeks but more is needed to get back to normal levels. It would appear that the major drought affecting this area has been alleviated for the time being.

As I write this article, the water level in Beaver Lake is in excess of 1113 feet above sea level. If memory serves me correctly, that is some eight feet above the low we experienced earlier this year. The optimum level is 1120 feet above sea level.

We are very fortunate to have the Beaver Water District to meet the needs of the people and businesses in this area. BWD currently has sufficient water and treatment facilities to supply up to 100 million gallons of treated water per day. So far that is well above the highest demand. The district has on-going expansion plans and resources to stay ahead of our growing population’s demand.

Getting the water to the users is the problem for Bentonville and Rogers. The two cities now share two water transmission lines, one 24 inches wide, the other 30 inches. Together, the lines can transport a maximum of 29.5 million gallons of water a day to the two cities.

Bentonville has started construction of a 48-inch water line which is scheduled to go on line in April or May 2007. When Bentonville’s new water line is complete, Rogers will purchase the two older lines and take over as sole user.

Until then, water conservation is the rule for both cities. Procedures, consisting of six stages of conservation, were put into place in 2005. Water usage drops during the winter months so the conservation rules were temporarily relaxed.

With summer returning and the population continuing to swell, it would seem likely that even more water conservation will be needed this summer.

The first two stages of conservation are considered voluntary and consist mainly of common sense – limit time in the shower, run the dishwasher and washing machine only when full, reduce outdoor usage and so forth. From there, the stages continue through moderate mandatory measures all the way up to and including water rationing.

For more information:

Beaver Water District information and links to many other resources:

City of Rogers Water Utilities:

City of Bentonville water conservation ordinance:

Wednesday, May 03, 2006

Will Your Taxes Be Higher or Lower in Arkansas?

Everyone asks me about taxes here in NW Arkansas compared to where they are moving from. It’s a hard question to answer, since it depends on where the person is moving from, and it depends on the situation of the person moving to NW Arkansas. I recently came across an article on the Internet (see below) that said Arkansas ranked in the middle of most to least tax-friendly states. According to this article, an Arkansan’s tax burden is 10.3% of his/her per capita income, which makes Arkansas #27 on the list.

Like most statistics, this list may or may not mean much to any one individual. It does take into consideration property tax, state sales and luxury taxes, state income taxes, fuel taxes, and more. But it does not consider many other types of taxes, such as city and local sales tax, excise tax, and estate and inheritance taxes. Nor has it considered tax credits you may qualify for or the type of income you have.

Last but not least, by its very nature it cannot consider those things that are most important to you and your family. Are you moving to Arkansas to take on a new position? Are you recently retired and looking for an agreeable climate where you can live without treacherous snow and ice for several months of the year? Do you need to move closer to family so you can help them or they can help you? How important is the cultural scene to you? Perhaps you’re more interested in beautiful scenery and good, clean air to breath than Broadway shows. These are all personal decisions that would hold more weight in a decision about where you want to live. Tax-friendliness of a state is much further down on the list for most people.

Different types of income have different tax consequences. Arkansas does not tax Social Security benefits, VA benefits, Workers’ Compensation, Unemployment Compensation, or Railroad Retirement benefits. Arkansas does not tax the first $9,000 of U.S. Military Enlisted compensation. The first $6,000 of U.S. Military Officer’s compensation is also exempt from state income tax.

The first $6,000 received from an employer-sponsored retirement plan and/or from an IRA distribution is exempt from Arkansas income tax. Arkansas also allows a direct credit of $21 against state income tax for everyone. If you are over 65, the credit is doubled. When the above factors are executed, many retirees find they have zero (0) state income tax to pay in Arkansas.

In every state, property taxes will vary according to the city, county, school district, library district, fire district, etc., where the property is located. The rule of thumb that we (realtors) use in Washington and Benton Counties is that property taxes will be slightly less than 1% of the purchase price, less the $300 Homestead Tax credit. This will vary according to municipality (i.e. their mil rate), and homes outside of city limits will have a mil rate less than those in a town.

According to Kiplinger’s Magazine, Arkansans pay very little property tax, $321 per capita. Only residents of Kentucky at $286, New Mexico at $283 and Alabama at $210 pay less. It’s not surprising that residents of two states that do not levy income taxes on earned income do pay considerably higher property taxes. New Jersey residents pay $1,591 per capita, New Hampshire residents pay $1,555 per capita and Texans pay $852.

Homeowners in Arkansas have who are at least 65 years age qualify to have their appraised evaluation capped. This provision helps senior citizens remain in their homes instead of being taxed out of them as evaluations increase. In addition, a property tax credit of up to $300 per year is available on a person’s principal place of residence, regardless of age.

And still another good point to note about Arkansas: it is heir-friendly. There is no estate tax in Arkansas.

The bottom line is that all political entities need revenue to provide services and that money must come from the people. All in all, I think Arkansas is very tax friendly compared to some other areas of the country.

For more information:

Washington and Benton County Property Millage Rates:

http://www.co.benton.ar.us/Administration/BCCollect/index.htm (scroll down and click on Current Millage Rates)
http://www.co.washington.ar.us (click on Information and then on Millage rates)

General Information about Taxes in Arkansas: