Impact Fees – How Much is Too Much?

Less than one year ago Fayetteville voters approved a ¼ of 1% sales tax increase to pay for $65.9 million in bonds for street improvement projects.

Now Fayetteville residents are being asked to vote at a special election April 10th on the question of whether to impose an impact fee on builders to provide additional funds to improve roads.

If the impact fee passes, the additional amounts charged builders will vary from $2,363 for a single family detached home, to $1,319 per room for a hotel/motel, and on up to $2,701 per 1,000 square feet of commercial or office space.

As usual, there is more than one point of view when looking at this problem.

Does it make sense that the builder should be charged for the infrastructure that his project would necessitate? It’s easy to say “Yes, that sounds logical.” But look a little deeper into the problem and you’ll see it is the buyer or renter that will ultimately pay the fee. Homes will cost more and rents will rise.

I’ve written previously about the lack of affordable housing in NW Arkansas as a whole and Fayetteville in particular. Adding another $2,363 to the cost of each home only makes homes less affordable.

Another issue is whether increasing the impact fees already in effect will deter businesses from locating in Fayetteville. That issue, too, can be argued two ways. Some say that businesses seeking to expand or move to Fayetteville will look at other areas where fees are lower or nonexistent, and this has already happened.

If businesses locate elsewhere, Fayetteville’s sales tax receipts will decrease accordingly. Keep in mind that sales tax is a principal source of revenue for city capital improvement and schools. There has already been a decrease in sales tax revenues in the last quarter of 2006.

Others say look at Bentonville. The impact fee for a single home in that city is $4,750 and the city is growing at a major pace.

The new impact fee will make Fayetteville’s the highest in NW Arkansas at $4,897. Springdale has no impact fees and has completed major improvements on their artery streets, as well as neighborhood streets, by sales taxes voted by residents and by bond issues. Rogers charges a $2600 “sewer and water hook-up” fee, which some call a disguised impact fee and which has been challenged in court.

However, the bottom line here is that developers in Fayetteville already pay impact fees for new-construction, which are passed on to the consumers of these homes. Developers also are required to install (at their own expense) new roads and other infrastructure items, such as water lines, sewer lines, etc. An additional road impact fee will basically be another tax, not just on developers and builders of new areas but on everyone who lives in Fayetteville. It’s a case of double taxation, despite what those in favor of the measure say. And it puts the burden of street improvements for older areas of Fayetteville on the developers of new areas. Is that fair?

Ultimately, money for additional (and much needed) street improvements will have to come from somewhere. If taxes need to be increased, so be it—let the voters decide as they have in the past. But let’s be honest.

I have a great concern that Election Day is just around the corner, and I don’t believe the majority of voters have taken an interest in the matter at hand. I encourage everyone to become informed and vote his or her conscience. I personally am going to vote NO.

Here are some links for further information:

http://www.nwanews.com/nwat/News/51665/

http://www.nwaonline.net/articles/2007/03/25/news/032607fzroadfees.txt

http://www.nwanews.com/nwat/News/51598/

http://www.nwanews.com/adg/News/186156/

http://www.nwanews.com/nwat/News/51075

http://www.nwanews.com/adg/Special/182334

http://www.nwanews.com/nwat/News/51559

http://www.citizens4fayetteville.org/

http://voteforfayetteville.org/

Women Buying Homes in Record Numbers

A majority of American women now live without a spouse according to a New York Times analysis of U.S. Census Bureau data. In other words, 51% of adult women in this country are on their own.

Though married couples continue to dominate the market, single women now purchase approximately 22% of all homes bought in this country. Single men constitute only 9% of home purchases.

I found that number surprising but looking a little deeper, it isn’t surprising at all. Today’s women are better educated than ever before. Women college graduates outnumber men 57 to 43. Women are more confident, earn more money, and are becoming increasingly sophisticated about financial matters. Many women wisely see homeownership as the best way to reach financial stability and security.

It wasn’t too many years ago that single women were basically shut out of homeownership because lenders did not want to grant mortgages to them. Now lenders offer a variety of non-traditional mortgage products to encourage women to become homeowners.

Outreach programs by Fannie Mae and Freddie Mac have helped first-time homebuyers and minorities get into their own homes. For example, divorced women are frequently given first time buyer status, thus making low down payment or subsidized loans available to them even if they owned a home in the marriage.

Child support payments can now be counted as income, which boosts the ability of many newly single parents to qualify for a mortgage.

Even recent college graduates are finding mortgages that enable them to become homeowners with only a small cash down payment.

And, women have discovered they don’t need a husband to put up a shelf or paint the living room. Thanks in part to large home improvement stores that offer classes on how to do just about anything to do-it-yourself television programs, women have become empowered. They are willing and able to take on projects their grandmothers would never have considered.

I frequently help single women purchase homes. I bought my first home in 1975, back in the days when single women rarely bought homes, and it was one of the best investments I ever made. Whether it’s your first home or you’re moving up, I will be happy to help you do the same. Call me at 479-966-0435.

For more information:

http://www.rismedia.com/wp/2007-02-12/as-the-nation-changes-so-do-home-buyers/

http://www.mortgagenewsdaily.com/7172006_Woman_Home_Buyers.asp

http://www.bankrate.com/brm/news/real-estate/women-buyers1.asp

2006 NW Arkansas Housing Market Report

I have just finished a marketing report for 2006 for NW Arkansas. It gives conditions of the housing market, absorption rate, the number of homes for sale by price range, and much more. The towns covered are Bentonville, Fayetteville, Rogers, Springdale, and Bella Vista. See what home prices have been doing in the past years to help understand what is happening in the market now as the needed "adjustment" is also occurring here. To view this report, visit my main website at http://www.judyluna.com and click on 2006 Market Report under Articles and Links on the left of the home page.

Do-it-Yourself Checklist

I’ve known people who seem to have the ability to do almost anything and do it well. Unfortunately, I’ve also known people who undertake tasks they never finish or when they are finished, you wish they never started.

If you are thinking about repairs or improvements to your home, please consider these points before you start:

Do I have all the skills to do the job right the first time?
Do I have the time required to do the job properly?
Can I actually do the work to a professional degree, or will it look as if an amateur did it?
Are all the right tools available? Can I afford to buy or rent all the right tools?
Have I considered all aspects of the job from beginning to end?
Do I need a license for electrical or plumbing tasks?
Do I need a building or zoning permit?
Is there a risk I will damage the home?
What do I risk if I do the work myself?
What is the possibility that I may be injured?
Will I lessen the value of my home?

All of these questions are fundamental but #11, “Will I lessen the value of my home?” is frequently overlooked by the do-it-yourselfer intent on saving some money. The question becomes vitally important when the homeowner wishes to sell the home.

Buyers will notice sloppy workmanship and it will affect their perception of the property. Sometimes a buyer will turn around and leave without any further consideration of the property.

Other times sloppy repairs (think crooked tile or a bad seam on the kitchen counter top) will result in a buyer offering several thousand dollars less on a property.

Even worse is a remodeling project that doesn’t meet local codes. That can be a nightmare.

So, I urge you to consider all aspects before you do-it-yourself. If you have the necessary expertise, fine. If you are not proficient, don’t shortchange yourself now. Have a qualified professional do the work.

For more information:

http://www.nwaonline.net/articles/2007/02/07/your_home/020807homeimprovement.txt

9th Graders to be Included in Fayetteville High School

The Fayetteville school board voted March 15 to add 9th graders to high school. Currently 9th graders attend two junior high schools.

The vote was tight – 4 members for, 3 against. By passing this item, the board accepted the recommendation of the Future of FHS Select Committee.

In February the board voted to accept the committee’s other recommendation – namely to continue operating only one high school.

Still unclear at this point is when the 9th graders will be added to high school and when/where the new high school will be built.

For more information:

http://www.fayar.net/admin/ftb_3-15-07.pdf

http://www.fayar.net/admin/ftb_2-22-07.pdf

Springdale Limits Parking Cars in Front Yards

The City of Springdale has passed some common-sense (but difficult to enforce) rules to reduce the number of vehicles parked in front yards.

An ordinance adopted by the City Council earlier this year will now begin to be enforced. It gives residents the opportunity to build one additional parking space no larger than 9 feet by 19 feet in their front yard. The new space must be landscaped and adjacent and parallel to an existing driveway. Residents are also allowed to pave up to 40% of their front yard for parking, and homes with existing gravel driveways will not be required to pave them.

Violators will be issued a citation on the first offense. After that fines of up to $500 for each offense and $250 per day for continued offenses will be assessed.

At first thought this may seem a bit unnecessary, but drive around the city and you will quickly understand the need for the ordinance. There are many neighborhoods where cars and trucks are parked all over the property. Sometimes the vehicle has a “For Sale” sign on it, other times it is simply a matter of too many vehicles for the size of the driveway. Worse yet are the vehicles in various stages of repair or those that will never again run on their own power.

On the other hand, the large number of vehicles in the yard in some neighborhoods is a reflection of the times. Many older homes and duplexes, for example, have only one-car garages. This may have been adequate in the past, when each family had only one car. But now, many families have more than one breadwinner and multiple vehicles. Older children may also have their own vehicle. There is simply no room to park all of them without parking on the lawn or blocking the street.

Another issue is that in rental areas, landlords could be asked to build additional parking spaces to accommodate their tenants’ needs. Concrete work is not cheap, so to build even one additional park pad can be prohibitively expensive. Also less affluent homeowners may not be able to do so. Luckily the Springdale ordinance allows for homeowners to apply for a variance with the Springdale Planning Commission in hardship cases.

And all of this is related to the issue of affordable housing (or the lack thereof). Increasingly low income area dwellings are home to multiple families, who share the dwelling in order to be able to afford the rent or mortgage payments. And with multiple families come multiple vehicles.

Overall, I think eliminating this eyesore will help maintain property values. But my question is WHERE (for multi-vehicle families in rental or low-income areas) the additional vehicles will be parked if the home’s owner is unwilling or unable to afford to build an additional park pad.

Enforcing this new ordinance is going to be difficult, if not impossible. If vehicles cannot be parked in the yard, they may end up being parked in the street, causing difficulty for traffic. They won’t go away, and fining property owners or tenants will not necessarily solve the problem.

Rogers is considering a similar ordinance.

For more information:

http://www.nwanews.com/story.php?paper=adg§ion=News&storyid=181226

http://www.nwaonline.net/articles/2007/03/11/news/031207rzcounciladv.txt

January Home Prices Declined in Northwest Arkansas

According to an article in the business section of the Morning News last Monday, home prices began sliding down in Benton County (decrease of almost 6%) in January with a significant drop in sales (down 19.69% from January of 2006). At the same time, while average prices in Washington County also decreased by 11%, the number of sales increased by 8.28% compared to January of last year.

This is a good-news/bad-news scenario for Northwest Arkansas, depending on whether you are a buyer or a seller of a home. For sellers, it means that they may not be able to sell their home at the price they might have hoped had the market continued rising at the same pace as during the past several years. For buyers, it means that with lower prices, they might be able to get a nicer home in their price range, and perhaps more people will now be able to consider purchasing a home.

A positive trend, not mentioned in the article, is that an increasing supply of more modestly-prices homes has contributed to the decrease in the average price of homes sold. This is good news, since it means that builders have finally seen the light and started building more affordable homes. This is also good news for buyers who haven’t been able to afford a new home because prices for such homes were so high. For example, there are now new homes being built in Fayetteville for less than $150K (only 2 subdivisions so far, but hey, it’s a start). This price for a new home hasn’t been seen for several years in Fayetteville. And this trend also exists in other communities in NW Arkansas.

According to Kathy Deck of the U of A Center for Business and Economic Research, the decline in home sales could be the beginning of the kind of corrections which have been occurring elsewhere in the nation. Until recently the NW Arkansas real estate market has largely been immune to these trends.

For more specific data on the January Arkansas Home Sale figures, the Morning News article can be seen at:

http://www.nwaonline.net/articles/2007/03/05/business/030607arrealtors.txt

To view a copy of Judy’s Market Report for 2006, write her an email at judy@judyluna.com

Homeless Count in NW Arkansas Revised Upward

The number of homeless people in NW Arkansas has been revised from 839 to 1,170. The 839 number was the preliminary estimate taken from a census of the homeless in January. The census was conducted for the Northwest Arkansas Housing Coalition, which planned to use the information to help its members apply for federal grants.

In addition to the 1,170 homeless, many more people are close to being homeless. Agencies that provide services to the needy see numerous examples every week of people who will soon be homeless – those who are just one paycheck away from paying the rent or those who have to choose between eating or heating.

As if that information isn’t sad enough, recent reports say NW Arkansas agencies will receive no money from HUD this year to help the homeless. More than $1.4 billion in HUD Continuum of Care grants was awarded nationwide to approximately 5,000 local programs to provide emergency shelter, transitional housing and permanent support to homeless individuals and families, according to a HUD press release. Not even $1 will reach NW Arkansas!

What’s wrong with this picture?

For more information, see my post of February 11, 2007 “Recent Census Estimates 839 Homeless in NW Arkansas”

http://www.nwanews.com/nwat/News/50430/

http://www.nwanews.com/nwat/News/50431/

http://www.nwanews.com/story.php?paper=adg§ion=Special&storyid=182968

http://www.nwanews.com/nwat/News/50434/

Future of Fayetteville High School Update

In a close decision, Fayetteville School Board voted 4-3 to continue operating only one school for all high school students in the district. Currently, that means grades 10-12.

There is much more to be considered. For example:

Will 9th grade be removed from Junior High to High School?
Will the present school somehow be expanded or abandoned in favor of a new school elsewhere?
If it is to be a new site, where will that be?
What are the costs of these decisions?
What is the resale value of the present high school property?
Is enrollment expanding enough to justify the expense?

The Future of Fayetteville High School Select Committee charged with evaluating the future of the high school recommended adding 9th grade to high school but the board did not vote on that subject.

My son graduated from FHS a few years ago so I feel justified in giving my opinion. I’m in favor of keeping 9th graders in junior high. They need another year of maturity and chances of leadership positions in junior high before being tossed into the high school where they are “small fish” in a very big pond.

I’m also in favor of one high school because I fear having two high schools may create a rivalry of sorts. One school may be perceived as better, or more modern, or have better labs and classes, etc. Or, and let’s hope this would not happen, one school may happen to have more affluent students because it’s located in a “better” part of town.

It is worth noting that while all these decisions are being made, Springdale and Rogers have each seen their enrollment go flat after several years of incredible expansion. Springdale’s enrollment has dropped about 100 students from the end of 2005-06 school year to the present time. Rogers has lost nearly 200 students.

Springdale is now postponing construction of several new schools that were planned.

I wish Fayetteville School Board well as they deal with these difficult decisions.

For more information:

See also my post “Last Chance to Influence Decision on Fayetteville’s High School Expansion” of February 8, 2007

http://www.nwanews.com/nwat/News/50372/

http://www.nwaonline.net/articles/2007/02/25/news/022607szattendanceboundary.txt

More Tax Cuts for Arkansans

In addition to the state’s largest tax cut in history (reducing the sales tax on groceries by 50%) more good news arrived this week on a variety of tax cuts. These measures are designed to boost the economy, make Arkansas more attractive to business and retirees who carefully study tax implications before moving to a new state, and help many of our most vulnerable residents.

Increase in Homestead Tax Credit Becomes Law

An increase of $50 in the homestead tax credit was signed into law. Currently, homeowners in Arkansas are eligible for a credit of up to $300 on taxes for their principal residence. The new maximum credit of $350 will become effective with the 2007 assessment year and will appear on property tax bills in 2008.

There are approximately 696,000 homesteads in Arkansas and it is expected that about 538,000 homesteads will we benefit from some or all of the additional $50 tax credit.

The homestead tax credits are financed by a one-half percent sales tax collected by the state, which, in turn, reimburses the counties for the property taxes they did not collect because of the tax credits. According to the state finance department, a $60 million balance was on hand at the end of last year. Governor Beebe has stated, “We were able to determine that we could conservatively and reasonably [increase the credit] and still be sound going into the future.”

Income Tax Cuts for Working Poor Move Closer

It looks like state income tax cuts for low-income people are on the horizon. The House tax committee has endorsed a bill that would exempt approximately 62,000 Arkansans from paying state income tax.

In its current form, the bill would eliminate the following groups from state income tax:

Single people with an annual gross income tax (AGI) of less than $10,200;
Married couples filing jointly with less than two dependents and AGI less than $17,200;
Married couples filing jointly with two or more dependents and AGI less than $20,700;
Head of Household filers with AGI less than $13,700.

Arkansans with income above the federal poverty level but less than 33% above it would receive tax credits to partially offset state income tax. The state finance department estimates 89,000 taxpayers would be eligible for these credits.

This is a step in the right direction. Just imagine a family of four (or more) trying to make ends meet on less than $20,700 a year. If this bill becomes law, it would provide tax relief for people in low-paying jobs and cut the workload at the Department of Revenue at the same time.

A Bill Advances to Equalize Taxes on Military Officers and Enlisted Personnel

Under existing law, enlisted military personnel do not pay state income tax on the first $9,000 of pay. However, officers are taxed on all military pay over $6,000.
The $3,000 difference seems strange to me and apparently to Rep. Sandra Prater, D-Jacksonville, as well. She has introduced a bill that would make the first $9,000 of military pay exempt from state income tax, regardless of rank. The bill passed the House and Senate and has been sent to the Governor.

Reducing Sales Taxes on Utilities Paid by Manufacturers

Bills to reduce the sales tax that manufacturers pay on natural gas and electricity seem to be sailing through the legislature. If signed into law as expected, the sales tax paid on utilities used by manufacturers would decrease from 6% to 4.5% on July 1, 2007. Another scheduled decrease would drop the tax to 4% on July 1, 2008.

State officials say the decreases will reduce state revenue by $20.2 million next fiscal year and $30.5 million the next year.

Perhaps your first reaction to this news might be “What about the taxes I pay on utilities? I’d like to pay less, too.” But the situation bears a closer look.

Arkansas needs to retain the industry it has while at the same time it must recruit more economic development to the state. The 6% sales tax on utilities puts Arkansas at a disadvantage. Most of the neighboring states charge manufacturers lower or even zero sales tax on utilities.

The Arkansas Chamber of Commerce is a strong advocate of this tax cut. If it passes, Arkansas will be in a more favorable position to recruit new employers. Arkansas is still trying to land a huge Toyota plant and there are other possibilities on the horizon.

I say go for it - I’m tired of hearing about the ones that get away, especially now with the recent loss of manufacturing jobs in this area.

For more information on these subjects:

http://www.nwanews.com/adg/National/182567/

http://www.nwaonline.net/articles/2007/02/22/topics/assembly07/022207lrlegpropertytax.txt

http://www.nwanews.com/story.php?paper=adg§ion=News&storyid=182003

http://www.nwanews.com/story.php?paper=adg§ion=National&storyid=182089

New Tax Cut Benefits Everyone in Arkansas

Effective July 1, 2007, the state sales tax on groceries will be cut in half – from 6% to 3%. The details are still being worked out but this much is definite: When you buy groceries for human consumption, you will be taxed 3% less than the current rate.

The average savings is estimated to be at least $200.00 per year for a family of four.

Other items you buy at the grocery store will continue be taxed at 6%. That includes such things as paper products, cleaning supplies, pet food, diapers, personal grooming items and miscellaneous household supplies.

The reduction in sales tax is possible because the State of Arkansas has a huge surplus on hand and that surplus seems to be increasing each month. One recent estimate is an $844 million surplus in the state’s coffers by June 30, 2007.

There are innumerable ways to spend the surplus – roads, education, tax rebates and reductions, health care, ad infinitum.

But here is the plain truth: No tax is more regressive and repugnant than a tax on food! Everyone has to eat and levying a sales tax on food simply means that the lower a person’s income, the higher the percentage of their income they must spend in order to feed their families.

I urge the legislature and Governor Beebe to eliminate the remaining 3% tax on groceries in the near future. But that might be hard--it would have been better not to tax food in the first place, as other states have done. But this tax cut is a step in the right direction.

Note: County and city sales taxes remain unchanged. It’s possible some local governments may find it possible to lower their tax rates in the future but they remain in place for now. For instance, Fayetteville, Springdale, Rogers, and Bentonville all have sales tax rates of 2%. In addition to the city taxes, Benton County assesses an additional 1% while Washington County’s sales tax rate is an additional 1.25%.

Please watch for an additional article I expect to write soon on other tax cuts already signed into law or under consideration in the legislature.

For more information:

http://www.nwanews.com/adg/National/182567/

http://www.nwaonline.net/articles/2007/02/16/topics/assembly07/021607lrleggrocerytax.txt

http://www.arkansas.gov/dfa/excise_tax_v2/et_su_local.html

What is the Economic Impact of Hispanic-Owned Businesses in NW Arkansas?

Seeing signs recently in Fayetteville about a Korean restaurant preparing to open triggered thoughts of the many small businesses in NW Arkansas owned and operated by immigrants.

Minority-owned businesses are nothing new, of course. They have been the backbone of America since immigrants first came to America. As the immigrant population grows throughout the U.S., so does the number of businesses owned by minorities.

According to a new study by the Center for an Urban Future, a New York City think tank, immigrants have been more likely to be self-employed than native-born residents in every U.S. census since 1880. Further, immigrant entrepreneurs have been an overlooked and little-understood piece of cities' economies. The research shows that more businesses are being started by foreign-born vs. native-born entrepreneurs in major cities, driving growth in sectors from food manufacturing to health care.

NW Arkansas mirrors the nationwide trend.

Benton County’s overall population grew by 22% in the five-year period 2000 to 2005. At the same time, the Hispanic population grew 78%, from slightly over 13,000 to nearly 24,000. Hispanic population in Washington County showed a slightly smaller percentage of increase, 73%, while the overall population increase in Washington County was 14%. Translating that to numbers means the Hispanic population grew from approximately 13,000 to more than 22,000. Certainly no other ethnic group comes close to such an increase in our area.

So, it’s no surprise to see to see more and more signs in Spanish while traveling in the two counties. There are restaurants, grocery stores, auto sales and repair shops, clothing stores, daycare centers, real estate agents, notaries public, Spanish-speaking radio stations and newspapers, and more.

For many immigrants, entrepreneurship is the best way to rise above a menial, low-paying. Immigrants are known for their willingness to work hard to obtain a brighter future for themselves and their children.

However, they face many significant roadblocks, notably the language barrier and lack of available business loans. Another problem stems from the perception of banks and chambers of commerce the immigrants brought with them from their native lands.

It sometimes takes years for immigrants to feel secure enough to divulge business and personal information to banks. Many immigrants do not comprehend what a banker means when asked about their “business plan.” Their plan is to join with family members and work long, hard hours.

There is no doubt that minority-owned businesses contribute greatly to our local economy but the amount of the impact is difficult to determine. No one in NW Arkansas has made a thorough study. Some area chambers of commerce are reaching out to the Hispanic community, as are some banks. However, a comprehensive study is lacking.

The cost of such a study is the biggest obstacle. The Skyline Report, an economic summary of the real estate market in NW Arkansas which I frequently mention in my blog, is prepared for Arvest Bank by the Center for Business and Economic Research of the Sam Walton School of Business at the University of Arkansas. I’ve read estimates that the Skyline Report costs $250,000 annually. While certainly expensive, this comprehensive analysis is extremely useful for measuring the real estate market.

I believe the economic impact of Hispanic-owned businesses is being overlooked at best and ignored at worst. It is time for a thorough study of their importance in NW Arkansas.

The Hispanic population is the largest minority group in NW Arkansas and the U.S. There is no sense in burying our heads in the sand any longer; Hispanics, as well as other ethnic groups, are here to stay.

Perhaps one of the banks could see the benefits of such a study or area chambers of commerce could join together to fund an analysis. It needs to be done.

For more information:

http://www.nwanews.com/story.php?paper=adg§ion=Special&storyid=180945

http://www.hispanicbusiness.com/news/newsbyid.asp?id=55217

http://www.boston.com/news/local/massachusetts/articles/2006/09/17/
immigrant_businesses_transform_us_neighborhoods/?rss_id=Boston.com
+--+Massachusetts+news (copy and paste this entire link to read the article)

4th Quarter Skyline Report Released on NW Arkansas Housing Market

This past week the Skyline Report for the 4th Quarter of 2006 was released. Announced at a breakfast sponsored by Arvest Bank for Realtors®, developers, and others on Tuesday, February 13, Kathy Deck (Interim Director for the Center for Business and Economic Research) summarized the trends as presented by the data for the 4th quarter of 2006.

The Skyline Report is an economic summary of the real estate market in NW Arkansas, prepared for Arvest Bank by the Center for Business and Economic Research of the Sam Walton School of Business at the University of Arkansas. As Realtors®, we are very fortunate to have this kind of statistical analysis available to us, since it provides scientifically prepared data which confirms our sometimes-anecdotal experience of the real estate market.

The 4th quarter summary provided some interesting statistics. For the past several years, the results have revealed a tendency of builders and developers to build too many homes, especially expensive homes, which are now sitting on the market. However, this report showed some changes in this behavior, which I would interpret as positive indicators for the NW Arkansas housing market. But there was bad news as well as good news, depending on whether one lives or does business in Washington or Benton County.

According to Kathy Deck, the number of building permits drawn in Benton County has “fallen off a cliff,” particularly in Rogers. They were significantly down in the 4th quarter of 2006. For the housing market as a whole, this was a very necessary step because of the extreme oversupply of homes available in Benton County. The result has been that the number of complete but unoccupied homes in Benton County fell for the first time in many quarters, while the annual absorption rate continued to grow. This means that homes on the market are being purchased by people continuing to move into the area. There are still homes being built but at a slower pace, and employment growth continues at over 600 new jobs per month, which bodes well for continued absorption of homes. Another positive factor is that the price point of the permits pulled indicates a recognition of the need for more affordable housing. In Benton County this was for homes between $100,000 and $150,000 (not including the value of the land).

The data for Washington County, on the other hand, posed some warning signals. Although the number of building permits for Washington County was also down, and the number of homes under construction in active subdivisions was also down, the number of complete but unoccupied homes in Washington County continued to rise, while the absorption rate fell slightly. This means that homes currently on the market will take somewhat longer to sell, compared to Benton County. And with regard to the price point of permits pulled, the price point during the 4th quarter of 2006 was between $150,000 to $200,000 (not including land), which means that more expensive homes are still being built, despite a somewhat inflated supply already available in Washington County.

What this means for buyers is that it is a very good time to purchase a home, since interest rates are still low and there is a lot of housing inventory to choose from, especially if the buyer wants to purchase a new home. For sellers (including builders of new homes) this means that buyers are now calling the shots, so sellers need to price their homes competitively. Conditions are still “worse” in Benton County than in Washington County for builders with a lot of new unsold homes.

Some of the statistics of the report summary include:

1. There were 21,037 lots in the 301 active subdivisions in NW Arkansas in the 4th quarter, up from the previous quarter. Using the most recent annual absorption rate, the supply of remaining lots in those active subdivisions is sufficient for 47.0 months (almost 4 years worth).

2. In the 4th quarter of 2006, there were 2551 complete but unoccupied houses, compared to 2956 in the 3rd quarter. Benton County experienced a decline of 25.5% in available complete inventory from the 3rd quarter of 2006, but an increase of 92.4% in available complete inventory from the 4th quarter of 2005. This is to be compared with the 3rd quarter increase if 229% increase in inventory between the 3rd quarter of 2005 and 2006. In comparison, Washington County experienced a 28.1% inventory increase over the past quarter and a cumulative increase of 33.4% over the past year.

3. From August 16 to November 15, 2006, there were 1784 existing houses sold in Benton and Washington Counties. This is a decline of 21.1% from the same time period in 2005. Even as recently as the 3rd quarter, the decline (compared to the 3rd quarter of 2005) was only 3.1%. What that means is that home sales during the 3rd quarter of 2006 continued relatively stable, while in the 4th quarter the number of home sales declined significantly.

4. In the 4th quarter of 2006 in NW Arkansas, the average sales price of existing houses declined from 4th quarter 2005 levels by 4.5% in Washington County (compared to a continued increase of 2.3% in the 3rd quarter). In Benton County the average sales price continued to climb by 8.0%. .

5. There were an additional 19,811 residential lots that have been at least preliminarily approved in NW Arkansas. Adding these proposed lots to those in active subdivisions yields a whopping 114.8 months of inventory in NW Arkansas (that’s 9.6 years for those who don’t want to do the math).

6. Surprisingly, although construction is down, in terms of employment in NW Arkansas the Construction sector continued to have the highest growth rate. Manufacturing lost jobs, while all other sectors increased. The 2nd highest sector was Professional and Business services, while 3rd was Health and Educational services. Other sectors grew more slowly.

So what does this all mean for buyers and sellers of homes?

As with my analysis of the previous, 3rd quarter 2006 report, the same trends apply. If no new subdivisions are approved, even in the ones already approved and underway, there are a lot of homes out there, ready for sale—over 4 years worth in active subdivisions and almost 10 years worth in additional subdivisions already approved if these are built out. Economists might see the drop in new building permits as a negative factor, but I see it as an indication that builders and developers are finally getting smart and putting on the brakes to conform to the current reality. A further aspect of this data means that many of the approved subdivisions may not get built out quickly, given the supply of already finished homes on the market now.

Home prices as a whole are not going down, at least in Benton County. There may be some individual sellers who had their homes priced too high (from the recent seller’s market) and have adjusted them to current market conditions (a buyer’s market). But although home values are not increasing at the double digits of the past several years, there is still appreciation taking place. In Washington County, however, home prices have come down. What this means for buyers still sitting on the fence is that a significant adjustment has already taken place. It may continue into the present quarter, but I would foresee that by the time the good weather hits during the 2nd quarter of this year, prices will begin to go up again as more buyers hit the streets.

All in all, the “sky is NOT falling”, and I see the outlook for the NW Arkansas housing market as positive. Contrary to the national media hype, what’s happening in California and elsewhere is not happening here, and buyers seem to realize this. Anecdotally, business has been picking up despite the bad weather, and because inventory is still high, buyers have a lot to choose from. But because of the overbuilding as indicated by the Skyline report, some of those high-ticket homes may continue to sit for awhile.

One thing I should mention is that that Skyline Report is a phenomenal undertaking. What the Center for Business and Economic Research does is obtain data from the different cities about subdivision approvals, building permits, etc. Then they send out university students to physically examine what is happening on each lot in active subdivisions. They note whether lots are vacant, started (i.e. a slab), under construction, finished but not occupied, or occupied homes. The center also examines data from the NW Arkansas Multiple Listing Service as to home sales data and prices for homes, i.e. average and median prices for different areas

Recent Census Estimates 839 Homeless in NW Arkansas

As the once-small towns of NW Arkansas grow, and the area becomes more urbanized, problems found in larger metropolitan areas are beginning to surface. One of these is homelessness.

Here the homeless are mostly invisible. Most people like it that way – if they don’t see the homeless, it is easy to put them out of mind. But the reality is that more than 800 men, women, and children are homeless in Benton and Washington Counties.

839 is the preliminary count of homeless people conducted over a 24-hour period January 25-26 by the four major cities of NW Arkansas (Fayetteville, Springdale, Rogers, and Bentonville).

The homeless situation in NW Arkansas is certainly not unique. There are homeless people all over the country, in cities and towns both large and small. I honestly don’t know whether the number of people needing help in NW Arkansas is higher or lower than national averages.

But I am shocked to learn that nearly 400 children are homeless! It is difficult to comprehend that 400 children in prosperous NW Arkansas face uncertainty, hunger, cold, and discomfort every day.

Some of the causes of homelessness are well known – mental health issues, lack of education or job training, drug/alcohol abuse, domestic abuse, and marital problems to name a few.

But I feel another major issue is the cost of living in NW Arkansas. It has become too expensive for the average worker. Many of the homeless actually have jobs but wages have not kept pace with the cost of living. Some walk to work, others ride a bicycle, the bus, or find someone who will give them a ride. I think some people are so discouraged and disheartened they come to believe their situation is hopeless.

The Northwest Arkansas Housing Coalition, which began in 2003, has an ambitious goal – to end homelessness within ten years. It represents about 30 organizations and cities in seven counties.
Census data will be used to formulate short and long term plans to help the homeless. The data will also be used in the coalition's Department of Housing and Urban Development Continuum of Care applications for federal assistance.

I applaud the coalition for everything they are doing and all they hope to do to help human beings who have so little. Their efforts are in dramatic contrast with those of some other cities, such as Orlando and Fort Myers, Florida; Dallas, Texas; Las Vegas, Nevada, Wilmington, North Carolina, and Atlanta, Georgia. Those cities have burgeoning homeless populations and are passing laws that would make it difficult to provide aid to them.

For more information:

http://www.nwanews.com/nwat/News/49478/

http://www.nwanews.com/story.php?paper=nwat§ion=News&storyid=49604

http://www.nwanews.com/story.php?paper=adg§ion=News&storyid=169315

http://www.nwanews.com/story.php?paper=adg§ion=National&storyid=180784

Last Chance to Influence Decision on Fayetteville’s High School Expansion

February 15, 2007 is the last day to have your voice heard regarding the future of Fayetteville High School(s). The decisions at hand are twofold: whether to convert from one to two high schools and whether to add 9th grade to high school.

The Future of Fayetteville High School Select Committee has been encouraging the public to make suggestions and comments to help with the recommendation process. The committee has been meeting for months and plans to meet February 15 to finalize its report.

The report will be presented to the school board February 22.

A city’s public school system is a matter of great importance to all its citizens. Quality of life, perception of the city in general, real estate values, property taxes and more are all affected.

If you haven’t already commented, please take time to peruse the Future of Fayetteville High School Select Committee’s website. There you will find answers to many questions plus a blog. There is also a comment form.

Voice mail messages for the committee may be left at 479-973-8679. (Note phone number 973-9679 on the comment form is incorrect.)

The deadline for your input is prior to the committee meeting February 15, 2007.

Link to committee’s website:
http://schoolcenter.fayar.net/education/dept/dept.php?sectionid=2515

Link to my blog article dated July 24, 2006:
http://nwarealestateblog.blogspot.com/2006_07_01_archive.html

Economic Forecast for Northwest Arkansas

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/

Arkansas’ 1st Bilingual Post Office Opens in Springdale

According to newspaper estimates, the Hispanic population of Washington County increased 73% from 2000 to 2005, bringing the total to more than 22,000 people. During the same time frame Benton County’s Hispanic population increased 78%, to approximately 24,000 people.

With those figures in mind, it is good news that a bilingual (English/Spanish) U.S. Post Office is now open in Springdale. It’s located in the southeast section of the city, in a tiny strip mall at the intersection of Hwy. 265 and Electric Avenue.

Post Office officials say this is a first for Arkansas, but will definitely not be the last. Several more bilingual post offices are on the horizon for Arkansas.

Long lines at existing post offices testify to the need for more locations. In addition to providing a much-needed service to our Spanish-speaking neighbors, the new Post Office also serves as a convenient place for everyone to purchase stamps and mail packages. Located within a retail business, it is open all day, every day, Monday through Saturday. How’s that for convenience?

For more information:
http://www.nwanews.com/story.php?paper=adg§ion=Editorial&storyid=179794

Bella Vista – Notes on the Village Becoming a Town

Voters in Bella Vista Village approved incorporation at the November General Election by an overwhelming percentage – roughly 65% for, 35% against. If all the filings and other legalities fall into place as expected, Bella Vista will become Arkansas’ 520th municipality on January 1, 2007.

Now that the election is over, the work begins. Nothing will be easy or quick for the new town. They are literally starting from scratch.

Starting a town from square one with no financial resources is a formidable challenge. I think of it as a teenager leaving the nest with no money and trying to stand on his own. It can be done, but it’s difficult.

The Property Owners’ Association has governed things for many years. The association owns eight golf courses, seven lakes, two recreation centers, a tennis center and more. In addition to managing all the amenities, the POA has also been responsible for such necessities as street maintenance, fire protection and law enforcement. The association says it will retain ownership of the amenities and property owners will continue paying dues to maintain them.

The town can expect turnback money from the state to arrive sometime in 2007. Until then, there is no money to pay for police and fire protection, salaries for elected officials and employees, computers, phones, utilities, paper or pens, and all the other mundane and capital expenses necessary to run a town. (Arkansas turns back portions of the fuel and vehicle registration taxes it collects to municipalities. The amounts are based on census figures.)

In order to determine the amount of turnback funds Bella Vista can expect to receive, a census must take place. The U.S. 2000 census showed about 16,000 people residing in Bella Vista. However, the physical boundaries of the area have changed since 2000. One guesstimate is that only 14,000 people would have been counted within the boundaries of 2000.

Approximately 27,000 people now call Bella Vista home. Needless to say, more people in the town means more turnback funds. A special census would determine the official population – but there is no money at present to pay for the census.

It’s a catch-22 situation. The good news is the town will have help from various entities. Benton County Sheriff’s Department will continue to provide police protection until the town can assume responsibility. Cooper Communities, Inc., the developer that created Bella Vista in 1965, has agreed to donate office space and some computers for several months.

The new town and the existing property owners’ association must work together closely in the coming months. Many decisions must be made. Some assets will have to be transferred to the town while others remain with the POA. Costs must be determined. Compounding these problems is the fact that thousands of dues-paying property owners do not live in Bella Vista.

The elected mayor and aldermen have full plates. In addition to the items already mentioned and many more, they must draw wards of equal representation within the town. *

Overcoming the many hurdles coming up in the months and years ahead will be a daunting task – but it can and will be accomplished. I heartily commend and applaud everyone involved as they take on the challenges of developing a village into a town.

* Though Bella Vista is already large enough to be considered a city, the incorporation vote had to call for a town style of government because there was no town council in place to draw the wards. When the wards are drawn and population figures become official, the State of Arkansas will no doubt upgrade the designation to city of the first class.

For more information:

http://www.nwaonline.net/articles/2006/11/23/news/112406bzbellasheriff.txt
http://www.nwanews.com/story.php?paper=brog§ion=Editorial&storyid=41871
http://www.nwanews.com/story.php?paper=brog§ion=News&storyid=41685
http://www.nwanews.com/story.php?paper=brog§ion=News&storyid=41441

Also see my blog article dated March 19, 2006.

Manufactured Housing Could Help the Reduce the Shortage of Affordable Housing

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

Third Quarter Skyline Report Released

A few weeks ago the Skyline Report for the Third Quarter of 2006 was released. I’m a little behind on my blogging, so I didn’t report the results immediately, but (as they say) better late than never.

The Skyline Report is an economic summary of the real estate market in NW Arkansas, prepared for Arvest Bank by the Center for Business and Economic Research of the Sam Walton School of Business at the University of Arkansas.

Dubbed by some the “sky is falling” report, this summary provides a quarterly glimpse of present and future housing activity for Northwest Arkansas. For the past several quarters, the results have revealed a tendency of builders and developers to build too many homes, especially expensive homes, which are now sitting on the market. What this means for buyers is that it is a very good time to purchase a home, since interest rates are still low and there is a lot of housing inventory to choose from, especially if the buyer wants to purchase a new home. For sellers (including builders of new homes) this means that buyers are now calling the shots, so sellers need to price their homes competitively. Conditions are “worse” in Benton County than in Washington County for builders with a lot of new unsold homes.

Some of the statistics of the report summary include:

1. There were 20,791 lots in the 281 active subdivisions in NW Arkansas in the 3rd quarter, up from 19,326 in the previous quarter. Using the most recent annual absorption rate, the supply of remaining lots in those active subdivisions is sufficient for 46.8 months (almost 4 years worth).

2. In the 3rd quarter of 2006, there were 2956 complete but unoccupied houses. Benton County experienced an increase of 229% in available complete inventory from the 3rd quarter of 2005, with a 23% increase in the most recent quarter alone. In comparison, Washington County experienced a 17% inventory increase over the past 12 months.

3. From May 16 to August 15, 2006, there were 2,224 existing houses sold in Benton and Washington Counties. This is a decline of 1.9% from the same time period in 2005.

4. In the 3rd quarter of 2006 in NW Arkansas, the average sales price of existing houses increased from 3rd quarter 2005 levels by 2.3% in Washington County and by 6.1% in Benton County.

5. There were an additional 19,543 residential lots that have been at least preliminarily approved in NW Arkansas. Adding these proposed lots to those in active subdivisions yields a whopping 112.9 months of inventory in NW Arkansas (that’s 9.4 years for those who don’t want to do the math).

6. The volume of new building permits issued in the 3rd quarter declined dramatically year over year from 1405 to 870.

So what does this all mean for buyers and sellers of homes?

If no new subdivisions are approved, even in the ones already approved and underway, there are a lot of homes out there, ready for sale—almost 4 years worth in active subdivisions and almost 10 years worth in additional subdivisions already approved if these are built out. Economists might see the drop in new building permits as a negative factor, but I see it as an indication that builders and developers are finally getting smart and putting on the brakes to conform to the current reality. A further aspect of this data means that many of the approved subdivisions may not get built out quickly, given the supply of already finished homes on the market now.

Home prices as a whole are not going down. There may be some individual sellers who had their homes priced too high (from the recent seller’s market) and have adjusted them to current market conditions (a buyer’s market). But although home values are not increasing at the double digits of the past several years, there is still appreciation taking place. It’s higher in Benton County than in Washington County, but (I will repeat) home prices are not going down significantly.

Anecdotally, what I have observed is that instead of reducing prices, many builders and even sellers of existing homes are offering incentives to buyers—carpet allowances (for example) on existing homes and builder concessions and extras on new homes such as fences, blinds, closing cost help, etc., where in the past buyers would have had to pay extra for these. The prices aren’t going down (the builders had higher land, development and construction costs during the recent “boom” so it’s difficult for them to lower prices), but they are willing to help the buyers. Buyers can get more for their money now than they could last year when it was a seller’s market.

Another thing that is happening is that home sales have slowed a little compared to the last couple of years. But to put this in perspective, the last 2-3 years were the “hottest” in the history of the area and nationwide with record-breaking levels of home sales. Things are getting back to a more normal pace such as existed prior to the last few years of craziness. And a 1.9% decrease in home sales compared to 2005 is very small, which means that home sales continue to be strong in NW Arkansas. The builders and developers just kind of got ahead of the curve somewhat.

And to refer to my blog of a few weeks ago about the Bentonville development seminar, Jeff Collins of the Center for Business and Economic Research indicated that job creation is remaining steady at more than 600 new positions per month, and there are still about 1200 people per month moving to the area. This means that there is still a continuing stream of buyers available to purchase the homes that are on the market.

All in all, the “sky is NOT falling”, and I see the outlook for the NW Arkansas housing market as positive. Contrary to the national media hype, what’s happening in California and elsewhere is not happening here, and buyers seem to realize this. After a brief dip in sales in September and October (which could also be explained by seasonal factors), more home buyers are out on the streets again and seriously looking for homes. But because of the overbuilding as indicated by the Skyline report, some of those high-ticket homes may continue to sit for awhile.

One thing I should mention is that that Skyline Report is a phenomenal undertaking. What the Center for Business and Economic Research does is obtain data from the different cities about subdivision approvals, building permits, etc. Then they send out university students to physically examine what is happening on each lot in active subdivisions. They note whether lots are vacant, under construction, finished but not occupied, or occupied homes. The center also examines data from the NW Arkansas Multiple Listing Service as to home sales data and prices for homes, i.e. average and median prices for different areas

I have been working on a market report, which I (hopefully) will be able to finish within the next couple of weeks. This will provide more specific information about different price ranges, absorption rates, and availability of housing by town in NW Arkansas. Look for this in the near future.

Washington County Takes Action to Limit Density Near Cities

The Washington County Quorum Court voted November 9, 2006, to implement new zoning requirements near its cities. Because the new ordinance received the nine votes required in order to pass and by invoking the emergency clause, it became effective immediately.

Pros and Cons

Numerous discussions and proposals have been held in past months. As is usual in these matters, citizens held varying opinions on the subject.

Those in favor of limiting density cited lack of infrastructure, particularly fire protection. Rural fire departments have limitations by their very nature and high-density developments pose many problems. Lack of schools and high traffic on country roads were other major limiting factors. A desire to maintain the rural atmosphere also appeared to be a high priority item. Without zoning regulations, there was no way to stop apartment buildings or red-dirt pits from springing up next door to an existing farmhouse.

People against the vote, at least at this time, said more time should have been devoted to public discussion. Some were against zoning restrictions of any type because they don’t like being told what they can do with their land. That is the very reason they chose to live outside city limits. Owners of acreage felt that the new regulations would negatively impact the value of their land. One citizen voiced concern that the regulations were intended to keep less affluent people from being able to buy a starter home in the area.

Regardless, guesswork about when and how the Quorum Court might act have ended. The regulations are now law.

The Bottom Line

Any proposed development that did not have preliminary approval by November 9 is subject to the new ordinance.

The ordinance establishes zoning areas within two miles of larger cities and within one mile of smaller towns. Development in those areas is limited to agricultural uses and single-family homes, which must be situated on at least one acre of land. The larger cities are Fayetteville, Springdale, Farmington, Prairie Grove, West Fork and Lincoln. The smaller cities are Elkins, Elm Springs, Goshen, Johnson, Greenland, and Tontitown.

No action was taken to establish zoning outside the one- and two-mile limits around existing cities.

Certain commercial corridors such as U.S. 412 and sections of U.S. 71, U.S. 62 and Arkansas 16 will be exempt from the ordinance. The exempted area will extend 300 feet from the centerline of the highway.

Only One Other Arkansas County Has Similar Rules

Crittendon County adopted a master use plan in 1974, but it was basically ignored for years until being used again in 2005, according to Crittendon County officials.

It is interesting to note that Benton County was unsuccessful in its efforts to pass zoning ordinances a couple of years ago.

Wiggle Room

The new ordinance also created a Zoning Board of Adjustment, which can approve conditional use permits if the development is deemed compatible with the surrounding area. The Board will require a written application and fee plus notification to neighboring property owners that a variance is under consideration. The Board will determine whether the proposed use is compatible with the area and whether or not it appears to be detrimental to the area or a danger to the public. The proposed use must also not interfere with surrounding property owner's enjoyment of their land.

Currently, a permit is not required to build a single-family home as long as it will be on at least one acre and no land splits are involved. The Quorum Court has a proposal under consideration that would require a permit in the future. The proposal will have its second reading in December and its third and final reading in January 2007.

For more information:

http://www.nwaonline.net/articles/2006/11/03/news/110306fzwshcoplanning.txt
http://www.nwaonline.net/articles/2006/11/10/news/111006wzfayzoning.txt
http://www.nwaonline.net/articles/2006/11/10/news/111106fzwashcoqc.txt

Housing Slump Slows US Economy, but NW Arkansas Still Strong

According to the Commerce Department, the U.S. gross domestic product (the sum of the value of all goods and services produced) grew at only 1.6% in the third quarter of this year, down from 2.6% in the second quarter and a phenomenal 5.6% in the first quarter. One of the key factors in the sluggish growth was a major slowdown in the national housing market (in both construction and sales).

In Northwest Arkansas, there is an adjustment occurring in the housing market as well. But some of the other economic indicators (which are weak nationally) are positive here, according to Jeff Collins, Director of the Center for Economic and Business Research at the University of Arkansas’ Sam Walton School of Business.

In a keynote address at the Bentonville Development Conference, held Friday (October 27) for builders, developers, and others, Collins outlined several factors which still make NW Arkansas a good place to live and do business and which bode well for a continuing strong economy here.

First, although there is an oversupply of homes available, particularly in Benton County, there are still approximately 1200 people per month moving to NW Arkansas. This will help in the absorption of current inventory. The current buyer’s market and a leveling of home prices, as well as continuing low interest rates, make this a good time to purchase a home.

Second, job creation in the area continues at over 600 jobs created each month. He noted that from 1996 to 2006, 49% of all new jobs in Arkansas were created in NW Arkansas. People who move to NW Arkansas (except for retirees), do so for employment reasons.

Collins did note a couple of warning signals, however, and stressed the need for creating high wage, high skill jobs. In the past these jobs were in manufacturing, but those are disappearing and being replaced with service sector positions. Service sector employment does not necessarily mean low wage positions but also can include professionals such as doctors, lawyers and others. The key to creating such high wage, high skill jobs is growth in education which will result in knowledge-based employment and higher-wage positions. At present, although NW Arkansas is one of the most affluent areas in the state, per capita personal income (PCPI) is only 80% of the national average. The rest of Arkansas is “poorer”.

Another challenge for the area is to manage the infrastructure required for the continuing growth. The trend in all of Arkansas is towards increasing urbanization in Little Rock and NW Arkansas, while other areas are actually losing population. But public resources are lagging, and must be brought up to speed.

All in all though, Collins seemed optimistic about the area’s ability to weather these challenges and about the current positive outlook for economic activity in NW Arkansas.

For more information about the Commerce Department report:

http://www.washingtonpost.com/wp-dyn/content/article/2006/10/27/AR2006102700408.html

Bentonville's New City Website is a Winner!

Bentonville is to be commended on their newly designed website. User friendly, it is a wonderful resource for builders, developers and real estate agents in the area, as well as for the general public. It has lots of “goodies” and could serve as an example for other towns in NW Arkansas.

In their GIS (Geographical Information Sytem), there are interactive maps for all uses, including a link to Benton County parcel and lot information as well as FEMA flood zones (present and proposed), zoning and land use information, traffic counts on major streets, and the master street plan. For builders and developers, the utility maps show water lines, sewer lines, storm drainage, and fire hydrants. There are also school district, cemetery, street construction, and census maps. One must download a plug-in to use these features, but once done, the information is all there.

The eGov-Online section has 3 sections: one for paying utilities on line and checking your utility usage, the second for builders who want to apply for a building permit or check the status of a current permit, and the third for developers and others who have applied or want to apply to the planning commission for development projects, rezoning, variances, or conditional use permits. All of the forms are there and downloadable, along with instructions, calendars, and other information needed to guide users through the process.

The site also has general information for residents of Bentonville on such topics as recycling, the compost facility, city government, tax information and the like. There are also links to other sites such as Ozark Regional Transit, Bella Vista Village, and the new Crystal Bridges art museum.

According to Bentonville officials, the new site was developed with users in mind. Many of the phone calls currently received by city officials and employees are from residents with questions that can now be answered 24/7 by information on the website.

Good job, Bentonville!

The website address of Bentonville’s new website is:

http://www.bentonvillear.com/

Baby Boomers Will Continue to Dominate the Housing Market for Many Years

It is probably no surprise that the housing needs of baby boomers are still a hot topic of conversation. The National Association of Realtors (NAR) gives a great deal of thought to this subject and performs studies and surveys to help forecast future needs.

The largest population group in U.S. history, the 78 million baby boomers are just now starting to reach early retirement age. Boomers have tremendous purchasing power. Most live in two-income households, with a median income in 2005 of $64,700. That is 31% higher than the median for all households. This generation makes up 37.5% of U.S. households, but receives nearly 50% of all aggregate household income, which helps to explain why 80% of boomers are homeowners.

One surprising fact did surface in the most recent comprehensive NAR survey: even with the statistics clearly showing financial resources greater than any generation before them, most survey respondents were unsure of their financial future. Seventy-five percent of respondents said they are not financially prepared for retirement and many even expressed anxiety about their ability to retire.

The retirement needs and wants of the boomer generation are as varied as the people themselves. Boomers are sometimes referred to as the “sandwich generation.” Many boomers married later in life than previous generations and therefore may still have children living at home. At the same time, it’s not unusual to find boomers with aging parents to care for.

One cannot simply assume baby boomers will address their retirement years in a pattern similar to older generations. NAR’s study surveyed nearly 2,000 baby boomers from all over the country with some likely results interspersed with a few that may not have been expected:

1. With life expectancy steadily increasing and retirement age for full Social Security benefits gradually increasing to age 67, many boomers are expected to work 5-10 years past age 65. Approximately 27% said they have no intention of ever retiring. Taking this into consideration, it appears they won’t be as interested in downsizing as the generations before them. Indeed, with today’s focus on technology, many people may prefer to have a home office or even two home offices.

2. When asked where they want to retire, 42% said in the South, 32% in the West, 15% in the Midwest and 12% in the Northeast. Consequently the Sunbelt continues to be a desirable destination for retirees.

3. Boomers have traditionally been active in the second home market, owning some 57% of all vacation homes. Forty percent currently plan to convert their vacation home into a primary residence in retirement.

4. The study also showed that 58% of rental properties are owned by baby boomers.

5. Ten percent of boomers indicated they plan to buy some form of real estate within the next year – many are considering a new primary residence, but the rest are thinking about land, second homes or commercial property.

6. Half of boomers who live in an urban area would like to retire in a small town or rural area, primarily because they believe doing so would result in a lower cost of living.

7. Other relocation considerations included being near family, availability of quality health care, and a better climate. Many also cited a desire to live near a body of water.

8. At the same time, more than a third of all baby boomers want to retire in an urban or suburban setting, motivated by quality health care and cultural activities.

9. When asked, half of baby boomers said they would consider living in an age-restricted community.

10. Women head up 20% of households. Their needs are usually different than traditional couples. Indeed, women frequently cited safety as their primary concern.

11. NAR President Thomas M. Stevens, said the survey shows most boomers want professional services when they buy real estate. Not only do they expect professional service and guidance from real estate agents, they place great value on those services. Mr. Stevens also stated “When buying a home, they want agents to represent their interests in the complex transaction process, and when selling they want help to establish the right asking price. Regardless of whether they’re buying or selling, boomers want agents to explain all of the complicated contracts, forms and agreements, to manage the closing process from start to finish, and to negotiate on their behalf.”

There is no doubt in my mind that baby boomers will have significant impact on all aspects of the real estate market for the next twenty years. This is the first time the U.S. has experienced a huge generation of affluent people nearing retirement age. Whether it’s a smaller home near their children and grandchildren or a place in the sun, boomers will be the driving force moving the market.

I stand ready to offer my professional assistance to anyone interested in buying or selling real estate in Northwest Arkansas. As a baby boomer myself, with similar attitudes found by the NAR survey, I can identify strongly with anyone looking for retirement property or a second home. Please call me at 479-966-0435 if you have any questions on this article or any other aspect of home ownership.

For more information:

http://www.rismedia.com/index.php/article/articleview/16337/1/1/

To read a previous article on the effect of baby boomers on the second home market, scroll down to the bottom of my blog and click Archives for June. The article is titled “Baby Boomers Dominate 2nd Home Market” and is dated June 14, 2006.

Rogers Opens Adult Wellness Center

Congratulations to the City of Rogers on opening the brand new Adult Wellness Center. As of October 2, 2006, anyone over the age of 50 will be able to join for a fee of only $25.00 a year. Residency in the city is not a requirement.

The 55,000 square foot facility is located at 201 W. Persimmon. It boasts two swimming pools, workout room with cardiovascular machines, full-size basketball court, an aerobics suite, 40-table card room, library, and a full assortment of activities. Hours of operation are 7 a.m. to 7 p.m., Monday through Friday.

The center will focus on helping senior citizens maintain functional strength and independence. Exercises can be tailored to meet special needs, such as people with hip and knee replacements.

It is a marvelous facility. Stop in for a visit.

For more information:

http://www.nwanews.com/story.php?paper=adg§ion=News&storyid=167583

http://www.nwanews.com/rhtn/News/1633/

More Shopping Opportunities in NW Arkansas

Sam’s Club, a division of Wal-Mart Stores, Inc., has finally come to Bentonville. It seems odd that it took so many years for Wal-Mart to open its own wholesale membership club in the city it calls home, but at last, it has happened.

The store is huge, the inventory is huge, and the crowds on opening day were huge.

The big box look has been updated a bit. The building boasts more than 140,000 square feet under roof with 54 skylights, a coffee bar and a large white pipe at the entrance that transports aromas from the store's bakery directly to the noses of incoming customers.

The only other Sam’s Club in NW Arkansas is located in Springdale. Plans call for that store to close when a new Sam’s is opened in Fayetteville. The new store has been delayed for several months while the courts settle opposition brought by local liquor stores over the sale of liquor at that site. Arkansas liquor laws are complicated so I won’t bore you with all the wrangling that has been going on. Suffice it to say the Fayetteville Sam’s Club is probably a year away.

Pinnacle Hills Promenade, the newest destination for upscale shopping, is now open at I-540 and Perry Road in Rogers. Everything (almost everything) you always wanted can be found there. The Promenade calls itself a “lifestyle.”

Anchors are JCPenney and Arkansas’ own Dillard’s. Malco Theaters will feature an updated look and 12 screens for your viewing enjoyment. There are too many specialty shops to list here in addition to food of all types. Some stores, such as Barnes & Noble, aren’t open yet but will be soon.

The open-air mall features almost 1 million square feet of retail and office space along with beautiful architecture, fountains and verdant landscaping.

Naturally, something of this magnitude creates a need for more infrastructure. New intersections have already been created and construction is underway in I-540 for new on- and off-ramps. When complete, they will replace the Perry Road overpass and the new road will be named “Promenade.” Time will tell what else has to be done as other businesses are lured to the area.

The City of Rogers will receive millions of dollars in sales tax revenue when everything is built out and operating.

But let’s not forget Northwest Arkansas Mall in Fayetteville. It has been open for several years and has been a mainstay for the entire area, including parts of Missouri and Oklahoma. It not only has JCPenney and Dillard’s but also a large Sears. All together some 100 stores are there – all heated and air-conditioned indoors.

NW Arkansas Mall is conveniently located on Hwy. 71B, where north Fayetteville and south Springdale meet.

Most likely NW Arkansas Mall will lose a bit of business for the first couple of months after the Promenade opens. That always happens because people just like to see what’s new. But I think there is enough growth to support both malls. I also think when it’s 96 degrees (F.) in August or a snowy 20 dgrees (F.) in February, many people will prefer indoor shopping.


For more information:

http://www.samsclub.com/shopping/navigate.do?dest=0

http://www.pinnaclehillspromenade.com/html/index9.asp

http://www.generalgrowth.com/Properties/ndPinnacle_Hills.htm

http://www.northwestarkansasmall.com/

More Options for NW Arkansas Sports Fans

The City of Bentonville had big plans for a new sports arena. It recently outlined plans for City West, a 90-acre mixed-use development that city leaders hoped would be developed in the western section of the city.

It sounded great – in addition to a 9,000-seat sports and entertainment arena, the complex would also have had a bowling alley, a multi-screen movie complex, and a movie and sound studio. Hotels, office, retail and residential spaces would have completed the complex when it was built out.

Everything changed October 19th when the Rogers City Council announced the sports arena would be built in their city near I-540 and Pleasant Crossing. Seems the distance from I-540 and lack of infrastructure (mainly roads) were the deciding factors in moving the development from Bentonville to Rogers.

The name has also changed. It will be known as the Northwest Arkansas Sports and Entertainment Arena.

Talk has already started about bringing a WNBA team to the new arena. The plans for the arena are basically the same as before: 9,000 seats and forty luxury boxes. The project will include a training center, as well as two hotels and various commercial and retail businesses.

Site work is expected to begin in four to six weeks with a projected completion date of Sept. 15, 2008.

Meanwhile, the City of Springdale has formally signed a contract to bring Double-A baseball to the stadium it plans to build in southwest Springdale. The Kansas City Royals’ farm team of the Texas League, currently known as the Wichita Wranglers, will be renamed and call Springdale home when the 2008 season starts.

For more background on the baseball stadium in Springdale, please read my blog article dated July 21, 2006.

Both projects are huge undertakings and are sure to spur even more economic development in our area.

For more information:

http://www.nwanews.com/story.php?paper=bcdr§ion=News&storyid=39468

http://ww .nwaonline.net/articles/2006/09/27/news/092806szrichvisit.txt

http://www.nwanews.com/bcdr/News/41098/

World Trade Center – Another Huge Economic Boost for NW Arkansas

The Sam M. Walton College of Business at the University of Arkansas has been accepted as a member of the World Trade Centers Association, a non-profit organization of 284 members in 78 countries. The association was founded in 1970 by the Port Authority of New York and New Jersey and is dedicated to “peace and stability through trade.”

Offices will be located in Rogers in a brand new building currently known as Pinnacle Business Center. The building will soon be renamed Arkansas World Trade Center Building.

This achievement resulted from cooperation between the University of Arkansas, the offices of senators Blanche Lincoln and David Pryor, U. S. Rep. John Boozman's office, the Arkansas Department of Economic Development, the U.S. Department of Commerce, the city of Rogers, and the Pinnacle Group.

The Department of Economic Development provided a $200,000 grant to pay the initiation fee into the World Trade Centers Association.

The Walton Family Charitable Support Trust has made a five-year financial grant to the center’s operating budget.

It appears to be a win-win situation for everyone, including the university, Arkansas manufacturers, Arkansas as a whole, and NW Arkansas in particular.

University students will work with Arkansas companies at the World Trade Center on international trade consulting and the university will have ample opportunity to focus on international business and fair trade.

Manufacturers, particularly small to mid-size companies that usually do not have the resources to expand into world markets, will have access to market research, trade missions, support services, governmental agencies, and more.

Northwest Arkansas will gain the recognition and economic boost brought on by expansion into world trade markets.

Everyone involved is to be commended for their efforts and alacrity in bringing this home to NW Arkansas. It’s hard to believe that something that was just an idea a few months ago will become operational January 15, 2007.

For more information:

http://www.nwanews.com/brog/News/39328/

http://www.nwanews.com/story.php?paper=adg§ion=National&storyid=167100

http://www.nwanews.com/story.php?paper=adg§ion=Business&storyid=166752