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I attended the Business Forecast 2007 luncheon January 26th, which is presented annually by the Center for Business and Economic Research at the U of A Sam M. Walton College of Business. Once again, NW Arkansas outshines the rest of the state in almost every aspect one might consider.
Three top economic forecasters presented their vision of the world, national, and state/ regional economies.
Here is a summary of the NW Arkansas information I took away from the meeting:
Arkansas in general conforms closely to the national economy, but NW Arkansas far surpasses the rest of the state.
The key point of Arkansas Bankers Association Chairman and UA Associate Professor of Finance Timothy J. Yeager is that NW Arkansas has been the main economic driver for the entire state and this will continue into the foreseeable future.
Arkansas has three main economies – Little Rock/North Little Rock Metropolitan Statistical Area, the Fort Smith MSA and the Fayetteville-Springdale-Rogers MSA, which includes Bentonville plus McDonald County, Missouri.
Although a loss of manufacturing jobs slowed the state’s overall economy in 2006, the state is expected to closely echo the economic growth of the country during 2007 with some variations in regional performance.
NW Arkansas created 62,400 new jobs in 2006, or 61% of all the new jobs created in the state. Little Rock created 36,500 jobs, or 35% of the total. The rest of the state saw only 4,000 jobs created, or 4% of the total.
The Fort Smith area is suffering greatly due to the loss of manufacturing jobs, which are being out-sourced to other countries.
The main negative in NW Arkansas is the oversupply of new homes available. However, NW Arkansas remains recession-proof despite the housing slowdown. People are still moving here at the rate of some 1,100 people per month which means the homes will be absorbed--it will just take a year or possibly longer. “Housing will not take Northwest Arkansas off track” said Yeager.
All in all, an excellent forecast for NW Arkansas.
For more information:
http://www.nwanews.com/adg/Business/180090/
Showing posts with label absorption rate. Show all posts
Showing posts with label absorption rate. Show all posts
Wednesday, January 31, 2007
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:
http://www.nwaonline.net/articles/2006/05/07/business/01cleansing.txt
http://www.nwaonline.net/articles/2006/05/09/business/01skylineresidential.txt
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:
http://www.nwaonline.net/articles/2006/05/07/business/01cleansing.txt
http://www.nwaonline.net/articles/2006/05/09/business/01skylineresidential.txt
Wednesday, January 18, 2006
Real Estate Market Report for Fayetteville, Dec. 2005
The Fayetteville market slowed considerably during December, mostly due to seasonal factors, but uncertainty in the economy and rising interest rates are also taking their toll.Inventory of homes on the market now is significantly up, even in the lower price ranges under $150,000.
Whether buyers will encounter a buyer's market or a seller's market depends entirely on the price range--the lower end is a seller's market and the high end, a buyer's.The number of sales in the past month was significantly lower in comparison to last year with only 67 homes sold in December compared with 94 in the same period last year according to the Fayetteville/Springdale Metro Area MLS. Under $100,000 there continues to be a shortage of homes for sale and a strong seller's market.
In the last year according to the Multiple Listing Service database, only 76 homes between $75,000 and $100,000 were sold, an average of just over 6 homes per month, due to a shortage of homes available. This is to be compared with 117 homes sold as recently as 2 years ago, while new "starter" homes were still being constructed in the Fayetteville area. Now there are only 18 homes on the market, of which only 2 are under 5 years old. Buyers who wish to purchase a home in Fayetteville under $100,000 must be ready (pre-qualified or pre-approved by a lender) to move quickly and make an offer on "the good ones" as they come on the market.
Between $100,000 and $150,000 these trends also exist. Currently there is a 2-month supply of homes of all ages from new to historical homes, up from 1.5-month's supply last month. In absolute numbers, 355 homes were sold in this price range in the last year, an average of 28 per month. Now there are 60 houses on the market, of which 2 are new and 7 homes less than 5 years old are for sale. Last year, the new homes in this price range have been primarily in the new Salem Meadows, Salem Village, and Sage Meadows subdivisions west of town, but these areas have now become built out. The townhouses for the University student market in an area called Skyler Place, which were plentiful last year, have alsot been sold. There is a new development of townhomes off Hwy. 16W, called Chevaux, listed at approximately $130K.
The situation improves markedly above $150,000 as the supply has jumped greatly with 98 homes currently on the market, about a 3.5-month supply. Almost 1/2 of these (44) are new homes. This is due to continuing development of several subdivisions in this price range, mostly on the west side of town: A new subdivision called Persimmon Place off Hwy 16W and Phase 2 of Fairfield. There are also some new condos near the mall in a subdivision, called Bellafonte Gardens, in this price range.
Between $200,000 and $300,000 there is an even better supply with 223 homes currently on the market, approximately a 10-month supply, a buyer's market. The new homes are in a variety of subdivisions, giving buyers in this price range more choices. For townhomes, there is Benton Ridge in SE Fayetteville as well as Bellafont Gardens on Zion Rd. near the Mall, and for single family homes, there is a new phase of Stonebridge Meadows under construction (24) and a new subdivision called Cross Keys west of I-540 (6). Existing subdivisions west of town also have homes in this price range--Clabber Creek (16), Legacy Pointe (7), and Fairfield (11) .
In the $300,000-$400,000 price range, there is about a 12-month supply, about 3/4 of which are new and newer homes. On homes over $400,000 the supply is also more than ample, about an 11-month supply. In terms of absolute numbers there are 102 homes on the market between $300,000 and $400,000 (62 new and another 18 under 5 years old) and 100 homes over $400,000, of which 46 are new homes and 26 are under 5 years old. In addition, prices have increased; new construction in Covington Park now starts at about $128 per square foot, and, depending on amenities, new homes in some of the gated communities east of town cost about $140 per square foot and up. Another promising area on the high end is the phenomenal new Clear Creek golf course community in Johnson. And in east Fayetteville out Hwy 45, a new subdivision called Waterford now has about 50 one-acre lots for sale at $100K each.
Traditionally the nearby small towns of Farmington and Elkins have provided lower-cost homes than were available in Fayetteville. However, now Farmington is just as expensive as Fayetteville, and homes in Elkins which are closer to Fayetteville are rising in price. On a positive note, with the completion of I-540, other communities are beginning to become options for affordable housing, namely West Fork and Greenland, south of Fayetteville. Prairie Grove, a charming small town west of Farmington about 20 minutes from Fayetteville, is experiencing some new development and presents possibilities for moderately priced houses.
Whether buyers will encounter a buyer's market or a seller's market depends entirely on the price range--the lower end is a seller's market and the high end, a buyer's.The number of sales in the past month was significantly lower in comparison to last year with only 67 homes sold in December compared with 94 in the same period last year according to the Fayetteville/Springdale Metro Area MLS. Under $100,000 there continues to be a shortage of homes for sale and a strong seller's market.
In the last year according to the Multiple Listing Service database, only 76 homes between $75,000 and $100,000 were sold, an average of just over 6 homes per month, due to a shortage of homes available. This is to be compared with 117 homes sold as recently as 2 years ago, while new "starter" homes were still being constructed in the Fayetteville area. Now there are only 18 homes on the market, of which only 2 are under 5 years old. Buyers who wish to purchase a home in Fayetteville under $100,000 must be ready (pre-qualified or pre-approved by a lender) to move quickly and make an offer on "the good ones" as they come on the market.
Between $100,000 and $150,000 these trends also exist. Currently there is a 2-month supply of homes of all ages from new to historical homes, up from 1.5-month's supply last month. In absolute numbers, 355 homes were sold in this price range in the last year, an average of 28 per month. Now there are 60 houses on the market, of which 2 are new and 7 homes less than 5 years old are for sale. Last year, the new homes in this price range have been primarily in the new Salem Meadows, Salem Village, and Sage Meadows subdivisions west of town, but these areas have now become built out. The townhouses for the University student market in an area called Skyler Place, which were plentiful last year, have alsot been sold. There is a new development of townhomes off Hwy. 16W, called Chevaux, listed at approximately $130K.
The situation improves markedly above $150,000 as the supply has jumped greatly with 98 homes currently on the market, about a 3.5-month supply. Almost 1/2 of these (44) are new homes. This is due to continuing development of several subdivisions in this price range, mostly on the west side of town: A new subdivision called Persimmon Place off Hwy 16W and Phase 2 of Fairfield. There are also some new condos near the mall in a subdivision, called Bellafonte Gardens, in this price range.
Between $200,000 and $300,000 there is an even better supply with 223 homes currently on the market, approximately a 10-month supply, a buyer's market. The new homes are in a variety of subdivisions, giving buyers in this price range more choices. For townhomes, there is Benton Ridge in SE Fayetteville as well as Bellafont Gardens on Zion Rd. near the Mall, and for single family homes, there is a new phase of Stonebridge Meadows under construction (24) and a new subdivision called Cross Keys west of I-540 (6). Existing subdivisions west of town also have homes in this price range--Clabber Creek (16), Legacy Pointe (7), and Fairfield (11) .
In the $300,000-$400,000 price range, there is about a 12-month supply, about 3/4 of which are new and newer homes. On homes over $400,000 the supply is also more than ample, about an 11-month supply. In terms of absolute numbers there are 102 homes on the market between $300,000 and $400,000 (62 new and another 18 under 5 years old) and 100 homes over $400,000, of which 46 are new homes and 26 are under 5 years old. In addition, prices have increased; new construction in Covington Park now starts at about $128 per square foot, and, depending on amenities, new homes in some of the gated communities east of town cost about $140 per square foot and up. Another promising area on the high end is the phenomenal new Clear Creek golf course community in Johnson. And in east Fayetteville out Hwy 45, a new subdivision called Waterford now has about 50 one-acre lots for sale at $100K each.
Traditionally the nearby small towns of Farmington and Elkins have provided lower-cost homes than were available in Fayetteville. However, now Farmington is just as expensive as Fayetteville, and homes in Elkins which are closer to Fayetteville are rising in price. On a positive note, with the completion of I-540, other communities are beginning to become options for affordable housing, namely West Fork and Greenland, south of Fayetteville. Prairie Grove, a charming small town west of Farmington about 20 minutes from Fayetteville, is experiencing some new development and presents possibilities for moderately priced houses.
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