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Whether you call manufactured homes by their proper designation or still refer to them as mobile homes (or even trailers), there continues to be a stigma attached to them. On the other hand, with the increasing urbanization of Washington and Benton Counties, formerly rural areas are now becoming high-end subdivisions, so that the old mobiles in the area now detract from the value of the new housing being built.
It’s a “Catch 22.” We need affordable housing. Land prices have skyrocketed so that new “stick-built” homes are too expensive for many workers whose salaries have not kept pace with the cost of housing. Manufactured housing might provide a lower-cost alternative. But the current climate of development with regard to manufactured housing is “not in my backyard.” The old attitudes still apply.
New manufactured homes are built to an exacting Federal construction code implemented in 1974, known as the HUD Code. They are transported and installed under state and local laws and regulations. The HUD Code encompasses construction and performance of heating, air conditioning, ventilation, plumbing, thermal and electrical systems. Many manufacturers view the HUD Code as minimum performance standards and exceed those standards in their basic designs plus offer upgrades for increased energy efficiency and overall performance. And if such a home has a bank-approved permanent foundation, it is eligible for regular mortgages, rather than high-interest loans, and it has a decidedly increased re-sale value.
Some parts of the country (Arizona being a good example) have lovely parks, especially for retirees, where people can either rent a space for their manufactured home or buy their land in a park. Many of these parks offer swimming pools, community centers with large kitchens, pool tables and meeting spaces, etc. To assure ongoing aesthetics, regulations usually cover everything from maintenance of the exterior of the home to pets, fences, parking and clotheslines. Residents frequently become close friends with their neighbors and feel a deep sense of security because they care about and look out for each other.
I am sorry to say, this type of park does not exist in NW Arkansas. Most here are meccas for lower income dwellers, and they don’t have a lot of amenities such as those described above. But they do often develop a sense of community, according to local owners of existing mobile home parks. And they do provide a low-cost alternative for residents who cannot afford a “stick-built” home.
Let’s analyze the situation for a moment. The cause of the bad reputation of manufactured homes is not the quality of construction; it is what some people who live in manufactured homes do to their home sites. One does not have to go very far in NW Arkansas to find old trailers, mobile homes, and even newer manufactured homes surrounded by junk—the term for this is “trailer trash.” I have never been able to understand why some people prefer to decorate their yards with old washing machines, sofas, and vehicles that haven’t been usable for many years.
However, I must say that owners of manufactured homes do not have an exclusive on that type of décor. I have also observed many older homes where residents of stick-built homes do the same thing. A couple of these come immediately to mind. One has gone so far as to not only leave his junked vehicles and dead refrigerators in the front yard, he has even imported other refrigerators and freezers to keep them company. The other one is definitely a Ford man – every pickup he has owned in the past 30 years is parked in his yard where he can see them and be reminded daily of their past lives.
But there are many good things about manufactured homes that should not be overlooked. Foremost is affordability. With the escalating price of land in NW Arkansas, builders can no longer afford to construct "starter" homes for under $100K as was possible even a few years ago. So-called "moderately priced housing" now starts at about $140K because of escalating land prices.
The latest information I have from Northwest Arkansas Regional Planning Commission defines affordable housing as a single-family home with a permit value under $75,000 (this does not include the land or lot). In NW Arkansas only 2.1 percent of housing units added in 2004 were valued below $75,000, and in the past couple of years the situation has worsened. It is easy to see a huge gap between what is being built and what is affordable for many families.
Prices are more affordable in the far western part of Washington and Benton Counties, and in the southern part of Washington County. Madison County and other more rural areas continue to be somewhat affordable but living that far out means longer commute times and increased travel expenses to the major NW Arkansas towns, where most of the jobs are.
Another problem is zoning regulations. Arkansas’ Affordable Housing Accessibility Act took effect October 1, 2003. It requires cities to allow prefabricated homes in at least one residential zoning district but implementation has been slow. The fear (and unfortunately, the reality) is that the new, often up-scale homes will be devalued by the mobile homes next door. Fayetteville and Bentonville have already changed their ordinances to conform to the new law. Fayetteville now allows them in an agricultural-residential district, and Bentonville has one residential manufactured housing district.
Since there has been no real zoning in the unincorporated areas of Washington and Benton Counties, the rural areas are where most manufactured homes are found. However in recent years, many people with land for sale place have placed deed restrictions on the land prohibiting mobiles/manufactured homes of any kind. It is increasingly difficult, even in rural areas, to find land where manufactured homes may be placed. Perhaps one answer (with the advent of zoning rules for Washington County) would be to designate some areas and/or rules for manufactured housing.
As more and more land is gobbled up for apartment buildings and stick-built homes, spaces in existing parks for manufactured homes have become ever more scarce. I can’t think of any new parks being built in NW Arkansas recently, although several have disappeared. Several existing mobile home parks have a zero occupancy rate, so the demand is there.
The challenge becomes more acute as NW Arkansas grows from being a predominantly rural area with a scattering of small towns to an urbanized metropolitan area. Now many people simply cannot afford the average stick-built home. Should they be forced to pay rent forever? Should they be forced to move somewhere else more affordable?
We need workers if we hope to sustain and grow the economy of NW Arkansas. The workers deserve a place to live – and a home they can call their own IS the “American Dream.” Our city officials must consider affordable housing alternatives in a realistic fashion and overcome traditional stereotypes. If manufactured housing is not included by planners, then what is the alternative?
For more information:
http://www.amha.net/enter/questions.htm
http://www.nwanews.com/story.php?paper=adg§ion=Business_Matters&storyid=127513
http://www.nwanews.com/story.php?paper=adg§ion=News&storyid=37130
http://en.wikipedia.org/wiki/Mobile_homes
http://publicarticles.info/articles/mobile_homes/index.asp
http://www.hud.gov/homes/manufactured.cfm
Showing posts with label land prices in NW Arkansas. Show all posts
Showing posts with label land prices in NW Arkansas. Show all posts
Monday, December 04, 2006
Wednesday, August 02, 2006
Affordable Housing
Recent studies indicate that the term “affordable housing” is becoming an oxymoron.
The National Association of Realtors® surveyed 1000 people in June 2006. By a 2-1 ratio, respondents believed that high monthly payments were the biggest obstacle to buying a home.
The perception used to be that the down payment and closing costs were the biggest obstacles to home ownership. Now people are worried that monthly income cannot be stretched to meet monthly bills.
In addition to the mortgage payment itself, people worry about the cost of putting gasoline in their car, the ever-increasing price of utilities, rising property taxes, escalating healthcare costs, and higher insurance premiums.
If they have an adjustable rate mortgage, they know that soon that payment will also be higher.
For Middle Americans, home ownership is not only their dream but also the surest way to build wealth. Many feel that dream is no longer reachable.
The hurdles to home ownership are complex. However, Los Angeles Mayor Antonio Villaraigosa succinctly summed up a large part of the problem, “…the fact that wages haven't kept up with the cost of real estate." While average hourly wages have risen about 20% since 2000, the national median home price has soared 55%.
Another large part of the problem is escalating land prices in most of the country, and NW Arkansas is no exception. Even as recently as 3-4 years ago, a few local builders were still building so-called "starter" homes. These were somewhat basic, but usually had about 1000-1200 square feet, 3 bedrooms, 2 baths, and ceramic tile in the wet areas. These were usually available in outlying areas like Elkins and other smaller towns. Even in some of the major towns, there were homes for under $100,000. I can remember some new homes costing even significantly less than that.
Builders are no longer able to build “starter homes.” Because land is so expensive, builders are forced to build a larger home on a smaller lot and charge more for it. The new "affordable" homes start at about $150K to $160K in the major towns of NW Arkansas, although it is possible to purchase a less expensive, smaller home in some of the outlying areas, such as Siloam Springs, Lincoln, and Gravette, etc.
Another reason for higher home prices is the impact fees many communities charge to help pay for everything from roads and sewers to police and fire protection to parks and other municipal facilities. The fees, which amount to several thousands of dollars, are passed on to the homebuyer.
Thus, for people of modest means, increasingly this means they must choose whether to live in their own home farther from their work or pay rent and live closer. But with gas prices so high, living farther away means extra transportation costs and that increases monthly expenses. People who would have purchased a home in the past no longer qualify for these more expensive homes.
In the meantime, the glut of high-end homes continues.
For more information:
http://realtytimes.com/rtmcrcond/Arkansas~Springdale~judyluna
http://www.realtor.org/housopp.nsf/pages/pulsesurvey2006
http://www.realtor.org/PublicAffairsWeb.nsf/Pages/NatlHsgOpPulseSurvey
http://www.usatoday.com/money/economy/housing/2006-06-26-affordable-homes-usat_x.htm
The National Association of Realtors® surveyed 1000 people in June 2006. By a 2-1 ratio, respondents believed that high monthly payments were the biggest obstacle to buying a home.
The perception used to be that the down payment and closing costs were the biggest obstacles to home ownership. Now people are worried that monthly income cannot be stretched to meet monthly bills.
In addition to the mortgage payment itself, people worry about the cost of putting gasoline in their car, the ever-increasing price of utilities, rising property taxes, escalating healthcare costs, and higher insurance premiums.
If they have an adjustable rate mortgage, they know that soon that payment will also be higher.
For Middle Americans, home ownership is not only their dream but also the surest way to build wealth. Many feel that dream is no longer reachable.
The hurdles to home ownership are complex. However, Los Angeles Mayor Antonio Villaraigosa succinctly summed up a large part of the problem, “…the fact that wages haven't kept up with the cost of real estate." While average hourly wages have risen about 20% since 2000, the national median home price has soared 55%.
Another large part of the problem is escalating land prices in most of the country, and NW Arkansas is no exception. Even as recently as 3-4 years ago, a few local builders were still building so-called "starter" homes. These were somewhat basic, but usually had about 1000-1200 square feet, 3 bedrooms, 2 baths, and ceramic tile in the wet areas. These were usually available in outlying areas like Elkins and other smaller towns. Even in some of the major towns, there were homes for under $100,000. I can remember some new homes costing even significantly less than that.
Builders are no longer able to build “starter homes.” Because land is so expensive, builders are forced to build a larger home on a smaller lot and charge more for it. The new "affordable" homes start at about $150K to $160K in the major towns of NW Arkansas, although it is possible to purchase a less expensive, smaller home in some of the outlying areas, such as Siloam Springs, Lincoln, and Gravette, etc.
Another reason for higher home prices is the impact fees many communities charge to help pay for everything from roads and sewers to police and fire protection to parks and other municipal facilities. The fees, which amount to several thousands of dollars, are passed on to the homebuyer.
Thus, for people of modest means, increasingly this means they must choose whether to live in their own home farther from their work or pay rent and live closer. But with gas prices so high, living farther away means extra transportation costs and that increases monthly expenses. People who would have purchased a home in the past no longer qualify for these more expensive homes.
In the meantime, the glut of high-end homes continues.
For more information:
http://realtytimes.com/rtmcrcond/Arkansas~Springdale~judyluna
http://www.realtor.org/housopp.nsf/pages/pulsesurvey2006
http://www.realtor.org/PublicAffairsWeb.nsf/Pages/NatlHsgOpPulseSurvey
http://www.usatoday.com/money/economy/housing/2006-06-26-affordable-homes-usat_x.htm
Sunday, July 09, 2006
Condo Mania in NW Arkansas--How Many is Too Many?
The debate has now been settled over whether the Divinity Hotel and Condos project can become reality. The newly-approved Divinity development has roused much controversy because of its size and scale in comparison to existing buildings in central Fayetteville. Its plans call for 30 condos and 137 hotel rooms above commercial space and restaurants.
A few years ago there wasn't a condo for sale in Fayetteville but that changed rapidly as developers began turning everything available into condos in central Fayetteville.
With the new mixed-use zoning plan expected to be approved soon, city planners anticipate turning Fayetteville into a "real city" with shops and commercial entities on the first floors of some of the new construction buildings, with condos upstairs.
There is already one large building under construction behind Dickson Street, and many older buildings have been already turned into condos, including the UArk Bowl, St. Joseph's Catholic Church and School, and others in the Dickson Street area.
Thanks in part to tax incremental financing (TIF), the abandoned Mountain Inn has been demolished and a new building has been approved for the site, conforming to the city's new guidelines. It will be known as the Renaissance building and its 18 stories will house a Marriott Hotel and condos.
The 9-story Lofts at Underwood Plaza is another new condo project located right on the square in Fayetteville. And the Legacy building is already underway, bringing 37 new condos to the Dickson Street area.
In addition, an apartment complex behind the NW Arkansas Mall (formerly Bristol Gardens, now called the Reserve at Steele Crossing) has gone through a condo-conversion and sales are underway. And there are new condos on Zion Road east of the mall for sale.
The problem is that land prices, especially in town, have risen so high that these condos are undoubtedly for an affluent group of people. The latest project to come before city planners calls for 20 condos, retail space and parking on a piece of land that is less than 1 acre in size. The land and existing building, which will be demolished, sold this year for $980,000.
Condos currently on the market in central Fayetteville are listed at close to $200 per square foot—certainly not for the average working person. Granted, many retirees who might be downsizing may have the money to pay these prices, as may some young, well-paid professionals who want to be within walking distance of restaurants and nightlife on Dickson Street.
I'm not arguing with the concept proposed by the planning commission--a vibrant center city where commercial entities are within walking distance. It's just that it seems that no one has asked the question, "will there be too many condos as a result"? Can Fayetteville's population absorb this large number of expensive multi-family units downtown?
A similar pattern is occurring in Benton County. Many condo complexes are being constructed in Rogers, and a development calling for three 15-story condos has been proposed for the shores of Beaver Lake. Much opposition has occurred for this project, leading to a question about what kind of development should occur near the lake.
A lesson could be learned from the folks in the Lake Tahoe area back in the 70s and 80s as lakefront condos proliferated. The pristine natural beauty was destroyed in some places due to lakefront condo complexes.
If you are concerned about condos, building heights, lakefront development or any other aspect of life in NW Arkansas, I urge you to make your voice heard. Stay informed, go to meetings, and take a stand. Your opinion counts.
For more information:
http://www.nwarktimes.com/nwat/News/42328/
http://www.nwarktimes.com/nwat/News/41377/
http://www.nwanews.com/adg/Business_Matters/153398/
http://www.nwanews.com/nwat/News/42544/
http://www.nwarktimes.com/nwat/News/42366/
http://www.nwaonline.net/articles/2006/07/01/news/01bzcondosuit.txt
http://www.gill-law.com/assets/pdfs/Article_TIF%20Financing%2007%2008%2004.pdf#search='mountaininnfayetteville'
A few years ago there wasn't a condo for sale in Fayetteville but that changed rapidly as developers began turning everything available into condos in central Fayetteville.
With the new mixed-use zoning plan expected to be approved soon, city planners anticipate turning Fayetteville into a "real city" with shops and commercial entities on the first floors of some of the new construction buildings, with condos upstairs.
There is already one large building under construction behind Dickson Street, and many older buildings have been already turned into condos, including the UArk Bowl, St. Joseph's Catholic Church and School, and others in the Dickson Street area.
Thanks in part to tax incremental financing (TIF), the abandoned Mountain Inn has been demolished and a new building has been approved for the site, conforming to the city's new guidelines. It will be known as the Renaissance building and its 18 stories will house a Marriott Hotel and condos.
The 9-story Lofts at Underwood Plaza is another new condo project located right on the square in Fayetteville. And the Legacy building is already underway, bringing 37 new condos to the Dickson Street area.
In addition, an apartment complex behind the NW Arkansas Mall (formerly Bristol Gardens, now called the Reserve at Steele Crossing) has gone through a condo-conversion and sales are underway. And there are new condos on Zion Road east of the mall for sale.
The problem is that land prices, especially in town, have risen so high that these condos are undoubtedly for an affluent group of people. The latest project to come before city planners calls for 20 condos, retail space and parking on a piece of land that is less than 1 acre in size. The land and existing building, which will be demolished, sold this year for $980,000.
Condos currently on the market in central Fayetteville are listed at close to $200 per square foot—certainly not for the average working person. Granted, many retirees who might be downsizing may have the money to pay these prices, as may some young, well-paid professionals who want to be within walking distance of restaurants and nightlife on Dickson Street.
I'm not arguing with the concept proposed by the planning commission--a vibrant center city where commercial entities are within walking distance. It's just that it seems that no one has asked the question, "will there be too many condos as a result"? Can Fayetteville's population absorb this large number of expensive multi-family units downtown?
A similar pattern is occurring in Benton County. Many condo complexes are being constructed in Rogers, and a development calling for three 15-story condos has been proposed for the shores of Beaver Lake. Much opposition has occurred for this project, leading to a question about what kind of development should occur near the lake.
A lesson could be learned from the folks in the Lake Tahoe area back in the 70s and 80s as lakefront condos proliferated. The pristine natural beauty was destroyed in some places due to lakefront condo complexes.
If you are concerned about condos, building heights, lakefront development or any other aspect of life in NW Arkansas, I urge you to make your voice heard. Stay informed, go to meetings, and take a stand. Your opinion counts.
For more information:
http://www.nwarktimes.com/nwat/News/42328/
http://www.nwarktimes.com/nwat/News/41377/
http://www.nwanews.com/adg/Business_Matters/153398/
http://www.nwanews.com/nwat/News/42544/
http://www.nwarktimes.com/nwat/News/42366/
http://www.nwaonline.net/articles/2006/07/01/news/01bzcondosuit.txt
http://www.gill-law.com/assets/pdfs/Article_TIF%20Financing%2007%2008%2004.pdf#search='mountaininnfayetteville'
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
Sunday, February 26, 2006
My Take on the New Millken Report (see below)
The new Millken Report has NW Arkansas continuing in the top 10 nationally as a vibrant economic zone. However, there were two areas of concern for possible future trends in the area: a low rating on technology output growth (a positive rating on this factor leads to higher paying professional and high-skill jobs) and increased housing values, which are now at the national average. The two trends, together with the strong job growth rating, points to a strong economy with low unemployment. But that job growth is and will continue to be of lower paying jobs which require less education. This, in my mind, hints at salaries for the average working person not keeping up with the cost of housing, thus creating a potential crisis in affordable housing.
When NW Arkansas topped the Millken Report a few years ago ahead of Las Vegas, the region catapulted to the top of the national radar in many respects. In the real estate market all of a sudden, in addition to local investors, there appeared investors from all over the country looking for “reasonable” investment property, beginning the upward exponential curve in prices for low-end homes and multi-family properties.
What happened was that many of the older existing homes, previously priced under $100K, began creeping upward in price as investors competed with first-time and low-income home buyers. Homes in that price range became smaller and shabbier as prices continued to rise significantly over the past couple of years. Now it is almost impossible to find a livable home for under $130K. Most homes in that price range either need work or are very small or both.
Sometimes these small fixer-uppers are even priced higher per square foot than nicer, larger homes. As recently as 3-4 years ago (before NW Arkansas was #1 according to the Millken Report), an older home in Springdale usually was listed for and sold for under $55 per square foot in the under $100K price range. Now these same homes—many in barely livable condition—are listed for and sell for over $85 per square foot. Some even sell for over $100 per square foot if they are in excellent condition.
On the other hand, larger, older homes in the $150K-$200K price range--completely remodeled--are being listed and sold at between $75 and $85 per square foot. But a home like this is not a suitable “rent house” and there is still a lot of building going on in this price range. The law of supply and demand applies here.
A contributing factor is that because of escalating land prices and higher construction and development costs, almost no builders are making small “starter” homes any more. As these costs increase, the new starter homes are now larger than they were previously, but they also have significantly higher price tags. It is no longer possible to acquire a home like this for under $100K, whereas about 3-4 years ago there were several builders offering such new homes as low as $75K. But such homes are also great rent houses. With the increased competition from investors as well as the lack of construction of new homes at affordable prices, first-time and low-income home buyers are having a tougher time finding adequate housing.
Even rental prices are rising as a result. In 2002 an average newer duplex with 3 bedrooms on each side in east Springdale was listed and sold for about $120K or less, depending on condition. Rents for those duplexes were about $550-$575. Now rents have risen to between $600-$650 for those units, and those same duplexes are listed for sale at $175K or above and selling for a minimum of $165K. Even some 2-bedroom units are selling for $165K. And the new duplexes being built are listed at $200K or above. Supposedly these can be rented at $850 per side per month, but I wonder….
In any case, because home prices on the low end and multi-family properties are now so expensive due to increased demand and low supply, rents are also rising as units are sold.
Is affordable housing in NW Arkansas a thing of the past? I hope not.
When NW Arkansas topped the Millken Report a few years ago ahead of Las Vegas, the region catapulted to the top of the national radar in many respects. In the real estate market all of a sudden, in addition to local investors, there appeared investors from all over the country looking for “reasonable” investment property, beginning the upward exponential curve in prices for low-end homes and multi-family properties.
What happened was that many of the older existing homes, previously priced under $100K, began creeping upward in price as investors competed with first-time and low-income home buyers. Homes in that price range became smaller and shabbier as prices continued to rise significantly over the past couple of years. Now it is almost impossible to find a livable home for under $130K. Most homes in that price range either need work or are very small or both.
Sometimes these small fixer-uppers are even priced higher per square foot than nicer, larger homes. As recently as 3-4 years ago (before NW Arkansas was #1 according to the Millken Report), an older home in Springdale usually was listed for and sold for under $55 per square foot in the under $100K price range. Now these same homes—many in barely livable condition—are listed for and sell for over $85 per square foot. Some even sell for over $100 per square foot if they are in excellent condition.
On the other hand, larger, older homes in the $150K-$200K price range--completely remodeled--are being listed and sold at between $75 and $85 per square foot. But a home like this is not a suitable “rent house” and there is still a lot of building going on in this price range. The law of supply and demand applies here.
A contributing factor is that because of escalating land prices and higher construction and development costs, almost no builders are making small “starter” homes any more. As these costs increase, the new starter homes are now larger than they were previously, but they also have significantly higher price tags. It is no longer possible to acquire a home like this for under $100K, whereas about 3-4 years ago there were several builders offering such new homes as low as $75K. But such homes are also great rent houses. With the increased competition from investors as well as the lack of construction of new homes at affordable prices, first-time and low-income home buyers are having a tougher time finding adequate housing.
Even rental prices are rising as a result. In 2002 an average newer duplex with 3 bedrooms on each side in east Springdale was listed and sold for about $120K or less, depending on condition. Rents for those duplexes were about $550-$575. Now rents have risen to between $600-$650 for those units, and those same duplexes are listed for sale at $175K or above and selling for a minimum of $165K. Even some 2-bedroom units are selling for $165K. And the new duplexes being built are listed at $200K or above. Supposedly these can be rented at $850 per side per month, but I wonder….
In any case, because home prices on the low end and multi-family properties are now so expensive due to increased demand and low supply, rents are also rising as units are sold.
Is affordable housing in NW Arkansas a thing of the past? I hope not.
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