Employment/Unemployment Picture in NW Arkansas

With all of the doom and gloom about the economy in the media, I wanted to share a few thoughts on the employment/unemployment picture in NW Arkansas---

Benton and Washington counties are alive and well compared to a host of other communities throughout Arkansas and the U.S. in general.

The unemployment rate for the country as a whole was 4.8% in February – a drop of one-tenth of one percentage point.

For the Fayetteville Metropolitan Statistical Area, the drop was six-tenths of one percentage point – from 4.8% to 4.2%. Fayetteville MSA, as defined by the U. S. Bureau of Labor Statistics, includes Washington, Benton, and Madison Counties in Arkansas and McDonald County in extreme southwest Missouri.

For sake of comparison, Little Rock MSA saw a drop of three-tenths of one percentage point – from 5.2% to 4.9%. Fort Smith MSA dropped to 5.1%, and Pine Bluff MSA dropped to 7.7%.

The overall unemployment rate for the State of Arkansas was 5% in February.

Looking at it from a different perspective, Benton County with a total population of some 196,000 people, had approximately 99,000 employed in February. Washington County figures are similar. The population there is estimated at 186,500 and 98,950 people were employed in February.

All in all, these figures are somewhat encouraging. For example, nine Metropolitan Statistical Areas in California are suffering with unemployment rates in excess of 10%. We hear a lot about Detroit these days and no wonder. The unemployment rate for that MSA is 8.5%. It’s disheartening to know that throughout the U. S., 42 Metropolitan Statistical Areas have unemployment rates of 7% or higher!

Things could certainly be better but after reading many facts and figures about the employment/unemployment picture, I know it could be much worse than it is in NW Arkansas.

For more information:

http://www.bls.gov/news.release/metro.nr0.htm
http://www.nwarktimes.com/adg/Business/221869
http://tinyurl.com/6rrysn
http://tinyurl.com/6kycho
http://www.arkansasnews.com/archive/2008/03/29/News/345765.html
http://www.nwarktimes.com/adg/National/221116
http://www.nwarktimes.com/adg/Business/221869

Walton Arts Center - Grow or Go?

There’s been a lot of talk lately about the future of the Walton Arts Center on Dickson Street in Fayetteville. Has it outgrown its current facility? Can it be enlarged? If a larger facility is needed, will it be in Fayetteville or possibly Benton County?

Along with those questions, the lack of sufficient parking spaces in Fayetteville inevitably surfaces. The city often talks about the need to build a parking garage on the site of the WAC’s current parking lot.

Parking has been a major problem in Fayetteville as long as I can remember.

WAC opened in 1992 and since then has hosted myriad performances such as Broadway shows, YoYo Ma, Bill Cosby, ballet, musicals, ad infinitum.

Fayetteville and Washington County residents have been huge supporters of WAC – there’s no argument about that fact. But, so have Benton County residents and businesses. Attendance at WAC is nearly equal between residents of the two counties, which would indicate WAC would be successful in either county.

Individual contributors are fairly evenly split between the two counties. However, donations by Benton County’s many corporations outpace Washington County donations by a 3-1 margin.

The City of Fayetteville and University of Arkansas jointly own WAC and the city considers it a jewel. WAC was a major impetus in revitalizing run-down Dickson Street and Fayetteville does not want to lose the Walton Arts Center. The University of Arkansas performs multiple shows and concerts in it each year and prefers to have it remain near their campus.

Given all that, there is no doubt that Rogers or Bentonville would be more than happy to see a new, larger WAC more to their area. They have land available with easy access to I-540 and they understand, as does Fayetteville, the economic benefits of a regional arts center.

The first of three feasibility studies has been completed and results indicate NW Arkansas could support a facility of approximately 2,500 seats. The current facility has only 1,200 seats. That makes it much too small for large shows that must sell many tickets to be financially feasible.

Enlarging WAC at its current site would be difficult – but not impossible.

Meanwhile, WAC’s board says it is not planning to move and will make no decisions until after the studies have been completed later this year. No matter whether they choose to grow or go, fund raising would be the next logical step.

So, while all the studies and plans are completed, the subject of a parking garage remains on the table.

Here’s my take on the situation: If, perish the thought, a new and larger WAC is built outside of Fayetteville, the current facility will still be there undoubtedly hosting events that require a concert hall of its size. Additionally, something is always happening on Dickson Street. Parking is a problem now and as the city continues to grow, more parking will be needed.

Let’s not talk the parking garage to death; let’s get started building it.

For more information:

http://www.nwaonline.net/articles/2007/12/04/news/120507fzwac.txt

http://www.nwaonline.net/articles/2007/12/07/opinion/120807editorial.txt

http://www.nwaonline.net/articles/2008/02/09/news/021008azwac.txt

http://www.nwaonline.net/articles/2008/03/18/news/031908rzrogersplan.txt

http://www.nwaonline.net/articles/2008/03/27/opinion/032808editorial.txt

http://www.nwarktimes.com/adg/News/219737

Professional Baseball in NW Arkansas

Play Ball! That’s a phrase many baseball fans have been waiting to hear. At 6:00 p.m. Thursday, April 10, the familiar phrase will be heard at the brand new Arvest Ballpark in Springdale, Arkansas.

Things have progressed right on schedule since voters narrowly approved spending $50 million in 2006 to buy land and build a ballpark on empty land near I-540.

The Northwest Arkansas Naturals will call the new stadium home. They are the Double A affiliate of the Kansas City Royals and will be playing in the Texas League.

Tickets to home games are almost impossible to buy because sales have been so brisk. Indeed, everyone in NW Arkansas wants the Naturals to be successful. The other cities of NW Arkansas are happy to have the ballpark near their cities. It is another amenity that enhances quality of life for the entire area – just as Fayetteville’s Walton Arts Center does and Crystal Bridges Museum of American Art will do when in opens in 2010 in Bentonville.

There have been various comments made that the ballpark will improve Springdale’s image, currently known as a ‘blue-collar’ town. Personally, I don’t see anything wrong with being a blue-collar town. It’s the working men and women who make this country the success it is.

The city fathers aren’t so much concerned with image as they are in making a financial success of the entire project. Commercial development must occur to provide increased sales tax revenue. Retail stores, hotels and restaurants, office space, and other entertainment venues are all seen as serious possibilities to replace pastures where cattle now graze.

To prepare for that, the city has been rezoning agricultural land near the park to commercial.

The city has spent more than $3 million to build water and sewer lines in the area so as be ready for future development.

They have also been working on building new roads and widening some existing roads. The ballpark is just a short distance from I-540 but as of today, the only access is by 56th Street, which is a two-lane road.

In the not too distant future, the new John Tyson Parkway will open, hopefully with an exit directly off I-540. The parkway will be the major east-west corridor across the southern part of Springdale.

With opening day just a day or so away, I would have to say the City of Springdale deserves appause for bringing this project in on time. It’s a very attractive asset to the community.

For more information:

http://www.nwaonline.net/articles/2008/04/05/news/040608azstadiumfut.txt

http://www.nwaonline.net/articles/2008/04/04/opinion/040508editorial.txt

http://www.nwaonline.net/articles/2008/04/05/news/040608azstadiumfinance.txt

http://www.nwaonline.net/articles/2008/04/01/sports/040208bbmnaturalnts.txt

http://www.nwarktimes.com/adg/News/222083

http://www.nwarktimes.com/adg/News/221889

Fayetteville HS Update

Last evening (March 26) the committee studying the future Fayetteville HS sought input from the community at an open meeting at Ramay Jr. High. About 150 people showed up and about 40 spoke on behalf of either keeping the school at the current site or building a whole new school on a different site. The atmosphere was very civilized, and the variety of view points pointed to the complexity of the issue.

There are good arguments for both options, but after listening to everyone speak, I tend to agree with those who want to keep the high school at the current site. The most compelling arguments to me are that it is adjacent to the university (with access to its facilities) and is centrally located.

The consensus seems to be that Fayetteville deserves a world class high school for the 21st century. One of the proposals is to build a new building across the street from the current structure and renovate the current structure. This (to me) seems like a good compromise between those who want a totally new building and those who simply want to renovate the old HS.

The site in NW Fayetteville just seems too far for many students, especially those on the east side of town. If there were to be a new high school on a new site, I guess I would favor the Morningside site between Huntsville Road and 15th St. This is still centrally located.

For those who are interested in some of the working papers on this issue, the Fayetteville schools site has downloadable files:

http://schoolcenter.fayar.net/education/dept/dept.php?sectiondetailid=24097

The issues are extremely complex, but I was impressed by the dedication of the committee in considering all points of view. There will be another public meeting on April 3 at a site yet to be determined.

For more information about the meeting and different points of view on the issue:

http://www.nwarktimes.com/nwat/News/63536/
http://www.nwaonline.com/articles/2008/03/27/news/032708fzpublicoutcry.txt

Future of Fayetteville H.S.--Public Meeting

A Public Engagement Meeting with the Fayetteville High School Select Committee is scheduled for Wednesday, March 26th to discuss the future location of FHS. This meeting will be held at the Ramay Junior High Cafeteria at 6:30 p.m.

The Future of Fayetteville High School is an important issue in our community, so please come out and express your opinion.

If you would like more information about this issue you can go to the Future of FHS website at:

http://schoolcenter.fayar.net/education/dept/dept.php?sectiondetailid=24097

Background:

Almost a year has passed since the Fayetteville School Board voted to remain a one high school district and add grade 9 to the mix. At that time the big question was where would that one school be located. Should the existing site be renovated and enlarged? Should a brand new school be built elsewhere? If elsewhere, just where would that be?

Fast forward to 2008. It seems the questions are exactly as they were. But the options have been narrowed down some. Two potential sites for a new school have been eliminated: a parcel south of 15th St. off Morningside Drive because of large areas of flood plain on the site as well as a sewer line through it, and a 94-acre parcel south of the Cliffs Apartments off Crossover Road because the owner of about 1/3 of the tract is not interested in selling.

As of now three sites remain in contention: the property north of 15th Street and south of Huntsville Road on Morningside Drive; a property the district already owns on Deane Solomon Road; and the current high school location.

A committee consisting of citizens, teachers, and students has been appointed to study the question of location. It is scheduled to make its recommendations to the board in April 2008. In addition to answering the big question, it has also been charged with determining at what point the new or improved high school should open.

But it’s not just question of building a new school or enlarging the old one. One problem has to do with streets to access the school. No matter which site is selected, the school district will also have to contribute to improving roadways for access to the school.

Members of the committee met with City of Fayetteville officials on March 12 to discuss what improvements would be necessary and a timetable for the improvements. According to Tim Conklin, city planner, it costs between $1 million and $1.3 million per lane mile to widen a two-lane road to a four-lane road. Additional challenges for the streets around the current site include the fact that they are narrow and wind through residential neighborhoods.

A second problem is the question of whether the University of Arkansas would buy the existing high school. The school board needs to know if U of A is serious about purchasing the property, and if so, how much would they pay. In my mind, it seems like a logical choice for the university. There is no other contiguous land available to enlarge the university campus.

But here’s the catch. The school board doesn’t yet know if it wants to sell the property and the university either doesn’t know if it wants it or won’t commit to buying it until the school board makes a decision.

Then there’s the question, again, of what size high school is necessary. If a new school is built, how many students should it accommodate? The growth rate in Fayetteville school district is currently negligible. In fall 2000, there were 2,474 students in grades 9-12. According to the most recent figures I saw, there are only 37 more students now – which is seven years later.

At that rate, it would take many years before capacity would be reached in a school for 3,000 students. Even more astounding is the statement that it would take 50 years to reach capacity if the school is built for 3,200 students!

Finally, the issue has polarized the community. Two grass roots organizations have formed, Build Smart (supports keeping the high school at the current location and opposes selling the current site to the University) and Fayetteville Students First (favors a high school at a new location, selling the current site and using the money for a down payment on the new school). Both groups are collecting signatures on petitions in support of their respective positions.

So it’s obvious there is a monumental amount of work to be done before many crucial decisions are made. There is one certainty, however. There will probably be a tax increase to fund whichever option is finally chosen. It behooves everyone to become informed. I cannot think of anything more important to a community than the quality of its education system.

For more information:

http://www.nwaonline.net/articles/2008/03/08/news/030908fztwogroups.txt
http://nwaonline.com/articles/2008/03/12/news/031308fzhsselect.txt
http://www.nwaonline.net/articles/2008/01/22/news/012308fzhighschool.txt
http://www.nwarktimes.com/nwat/News/61453
http://www.nwarktimes.com/nwat/Editorial/61372
http://www.nwarktimes.com/nwat/Editorial/61371
http://www.nwarktimes.com/nwat/Editorial/61370
http://www.nwarktimes.com/nwat/News/61639
http://www.nwarktimes.com/nwat/Editorial/61651
http://www.nwarktimes.com/nwat/Editorial/61650
http://www.nwarktimes.com/nwat/News/61609
http://www.nwanews.com/nwat/News/61996

The Feds Cut Rates Again – Why Doesn’t My Mortgage Rate Go Down?

The dramatic cuts in interest rates by the Federal Reserve Bank have caused many people to ask why mortgage rates are not dropping as well. It’s a legitimate question that has several answers and I’ll try to explain in simple terms…

The first, and most important, thing to understand is that the Federal Funds Rate is simply a suggested rate of interest that one bank can charge another bank for an overnight loan. At the end of each business day, banks must have certain amounts of cash on hand to meet reserve requirements as set by law. One bank may need to borrow to meet the requirements, while another bank may have surplus funds available. Banks can negotiate the actual interest rate on these overnight loans – they are not forced to charge the Fed Fund Rate.

Secondly, one has to realize that an overnight loan is extremely short-term while a 30-year fixed-rate mortgage is an extremely long-term loan. It is easy to commit funds at a certain rate for a short term but it is much more difficult to determine what the rate should be for a long term. Many factors such as anticipated economic growth and inflation rates must be taken into consideration in setting a rate of interest that would draw investors.

Now we have to take a look at U.S. Treasury Bonds. As we all know, T-Bonds are backed by the full faith and credit of the United States Government. In other words, T-Bonds are a risk-free investment. T-Bonds serve as a benchmark risk-free interest rate. Investors (you, me, professional money managers and everyone in-between) want to get the best possible return on their money based on the amount of risk involved.

Given the fact that the average length of a 30-year fixed-rate home mortgage is actually about ten years, it makes sense to compare investing in home mortgages (with risk) to 10-year fixed rate T-Bonds (no risk). The interest rate has to be higher on the mortgage securities or no one would invest in them.

As the number of foreclosures and defaults has increased (increasing risk), mortgage interest rates have had to go up in order to attract investors. This is the so-called “secondary market” for mortgages.

As many people who have purchased homes can attest, often the bank that gave the buyer the mortgage is not the bank to which buyers are making their payments. Shortly after closing, often buyers get a letter explaining that a different bank now has their mortgage. This is because the original bank sold their mortgage to another financial institution.

Many factors affect movement in mortgage rates – not the least of which is competition for money. An investor has money and a homebuyer needs to borrow money. Where can the investor get the best return?

This has been an overly simplified explanation of a very complex subject but I hope it helps at lease partially explain why changes in the Federal Funds Rate as discussed in the press have almost nothing to do with the mortgage rate.

For more information:

http://library.hsh.com:80/read_article-hsh.asp?row_id=85

Bentonville School District Voters Say No

Voters in Bentonville, one of the fastest growing school districts in Arkansas, rejected a proposed millage increase this past week. The district asked voters to approve a 3.99-mill increase in property taxes. Preliminary totals indicate the vote was 2,435 against and 1,699 in favor.

The increase would have made the district’s millage rate 44.09 mills, the seventh highest rate in Arkansas. Owners of a home valued at $200,000 would have been taxed an additional $160 annually if the measure passed.

(For sake of comparison - Springdale’s rate is 38.6, Rogers’ rate is 38.7, and Fayetteville’s is 43.8. However, that may change as all three districts are considering the possibility of passing millage increases to build new schools.)

Bentonville’s millage increase would have permitted a $209 million bond to purchase land, build six schools, make improvements to existing schools, and provide technology upgrades. In addition, some of the money would have gone to operational costs.

The district also planned to restructure existing debt.

In 2002 Bentonville voters approved a $110 million in funding to construct of five schools, athletic facilities and an addition to the high school. Since that vote, growth has been almost unstoppable. The number of students increased by 1,100 in 2005-06 and another 841 this school year.

A failed millage increase this year undoubtedly means the district will have to make some revisions and ask for another increase next year.

For more information:

http://www.nwarktimes.com/adg/News/219315/

http://www.nwarktimes.com/bcdr/News/59440/

Recent Reports Add Confusion to Foreclosure Statistics in NW Arkansas

It’s hard to get accurate data on foreclosures in Arkansas these days. The national media would have us think that every home on the market is being foreclosed on so all buyers need to do is make a "low-ball" offer and get a "steal," but it’s not true. Regular homes for sale are still maintaining fair prices, and although homes are no longer appreciating in NW Arkansas at the double digit appreciation rates of the past few years, they aren't depreciating either.

Awhile back I had some data which indicated that the foreclosure rate in Arkansas was actually lower recently, but now I have some new, but confusing information.

According to my new information, the 2007 foreclosure rate in Arkansas was 26.44% higher than 2006 according to Realty Trac, a well known company that maintains a database of more than 1 million properties nationwide that are in various phases of foreclosure. These statistics include default notices, auction sales, and repossessions.

The report showed 14,310 foreclosures in Arkansas last year, up from 11,318 in 2006, which ranks Arkansas 26th in the country.

States with foreclosure rate increases in excess of 200% include California, Delaware, Maryland, and Nevada. (The 200% is not a typographical error.) Washington, DC topped all the states with a whopping 608% increase!

Overall, nationwide foreclosure filings increased 79% in 2007 over 2006. Comparatively speaking, Arkansas looks pretty good with an increase of “only” 26%.

Nationwide, more than 1% of households were some stage of foreclosure. The foreclosure rate in Arkansas for 2007 is 0.51%, again a rather respectable ranking compared to many parts of the country.

Within Arkansas, foreclosure rates vary greatly by county. For example:

*Benton County saw a 105% increase, from 905 in 2006 to 1,855 last year. To put that in perspective, there was one foreclosure for every 41 households.

*Washington County increased 108%, from 567 to 1,177, - one foreclosure for every 65 households.

*Sebastian County (Fort Smith area) had a 4% drop in foreclosures, yet that was one foreclosure for every 66 households.

*Crawford County (Van Buren area) rate dropped 13% but that was one foreclosure for every 64 households.

Thus, you can see, simply looking at the rate of increase/decrease is not indicative of the number of households affected.

The official records of Benton County show only 509 foreclosures in 2007, down from 541 the preceding year. Two things can explain the discrepancy from the 1855 stated by the reporting firm and the county’s figure of 509:

The reporting firm included both judicial and nonjudicial foreclosures. In judicial foreclosures, the sale of the property is administered by the court system. In nonjudicial foreclosures, the sale is handled by an appointed trustee and filed with real estate records, which keeps it out of the Arkansas courts. Beginning January 1, 2008, a change in law requires nonjudicial foreclosures to be filed through the court system.

The reporting firm also included properties that may be only in default but counties do not record defaults. Thus, many of the defaults of fourth quarter 2007 won’t be included in county records until foreclosures enter the legal system in 2008.

So we don't know how many foreclosures there really are in NW Arkansas. But there are a bunch.

The bottom line here is that for buyers there may be some really good dealsfor buyers out there if the home they want to purchase is a “bank-owned” property. Foreclosed properties listed by realtors generally try to recoup what the bank has lent, so the list price may be substantially less than other similar homes in the same neighborhood. A clue to whether this may be the case is that MLS public remarks usually say something like “corporate owned” in the description.

For more information:

http://www.usatoday.com/money/economy/housing/2008-01-29-foreclosures_N.htm
http://www.nwaonline.net/articles/2008/02/09/news/021008arhomeforeclosures.txt
http://www.nwanews.com:80/adg/Business/216262/
http://www.nwaonline.net/articles/2008/01/30/business/013108foreclosurerates.txt

Good News and Bad News--NW Arkansas Housing Market

The good news is that now is a great time to purchase a home in NW Arkansas. With continuing low interest rates and a rising inventory of homes on the market, there is a lot to choose from for buyers. Prices have come down slightly, but the market in NW Arkansas has resisted this trend (which has devastated home values in other parts of the country), largely because of a robust economy.

The fear that prices may decline after they purchase a home is not necessarily one that buyers should be concerned about, depending on how long the buyer intends to live in the home purchased. The thing to remember is that traditionally a home purchase has been considered a long-term investment, not a short-term investment with double-digit returns. The housing market is not the stock market.

Home sellers in NW Arkansas have gotten spoiled in the past several years as appreciation rates soared. That drew investors from all over the country in a speculative frenzy, competing with buyers who actually wanted to live in the homes they purchased, driving up prices even further and faster. The peak was approximately in the 4th quarter of 2005, after which prices did decline.

But prices rose too far too fast and a correction was inevitable. The real estate market, after all, is cyclical. Now the investors and speculators have gone on to seek greener pastures elsewhere, so the absorption rate has slowed. Demand has fallen with fewer buyers on the streets (there is a seasonal factor at play here—winter and bad weather DO influence the real estate market in NW Arkansas). Homes are on the market longer, even in lower price ranges.

The result is lots of choices for buyers, many of whom are looking for a great deal. There are some very good buys now, but not every home can be gotten for a “steal.” Many buyers are still sitting on the fence, waiting for prices to go down. This may happen, but activity after the first of the year has increased, and when the weather improves and more buyers enter the market, those great deals will disappear quickly. That home that a buyer may have been “thinking about” may be sold, and the leisurely pace of looking for a home will disappear.

My advice to buyers is twofold: 1) if you find a home you really like, which meets your family’s needs, make an offer before it is sold to someone else; and 2) enlist the services of a reputable realtor to serve as your buyer agent, someone who is knowledgeable about the current (constantly changing) market, who will do a market analysis on the home you are about to purchase and guide you as to a fair price to offer while assuring that you don’t pay too much.

These comments are supported by the numbers. This past Thursday morning the Skyline Report was released at the regular quarterly breakfast in Fayetteville at the Clarion Inn. Kathy Deck, director of the Center for Business and Economic Research of the University of Arkansas, summarized the real estate market for residential, multifamily and commercial properties. She was guardedly positive as she presented housing market data for the 4th quarter of 2007.

Although there has been a decrease in the number of people moving to the area due to a decrease in the number of jobs created, the current level is still respectable. The five-year average of new jobs created in NW Arkansas has been 550 new jobs per month. At one point, during the peak, there were over 650 jobs created each month in NW Arkansas. This led to about 1200 people per month moving into the area. In 2007 just over 400 new jobs were created each month, and although Deck does not have new census figures yet, she estimated the number of people currently moving to the area each month to about 900.

For commercial space and multifamily units, vacancy rates are up. Some of this is due to over-building, and a decrease in new building permits may actually be a positive thing. In Q4 new commercial building permits in Rogers, for example, approached zero, while in Fayetteville there are continuing new projects in the pipeline. The situation in each town is different.

Multifamily vacancy rates are also up. According to Deck, the “ideal” vacancy rate (according to economists) for multifamily is between 5-7%, while rates under 10% are considered OK. Fayetteville’s multifamily vacancy rate for Q4 of 2007 was still under 10% but was higher than it was in Q3 of 2007 for 1 bedroom and 2 bedroom units. However for Springdale, Bentonville and Rogers, multifamily vacancy rates were over 10% and in some cases over 15%.

For residential properties, the Skyline Report looks mostly at activity in new construction in active subdivisions. In Q4 of 2007 the available inventory of new homes (including lots and homes under construction) represented a 44.9-month supply, up from a 42-month supply in Q3 of 2007. Building permit levels for new home starts continued to be low and there were few new subdivisions getting approval from city entities. This continued a trend begun in Q3 of 2006. The only NW Arkansas town with an increase in building permits issued in Q4 of 2007 when compared to Q3 was Rogers with a slight increase. Fayetteville observed only a slight decrease, while the other major towns experienced a larger decrease when compared to Q4 of 2006.

Other statistics showed more negative numbers, which in some cases is actually a positive thing as the housing market corrects itself. For example, in Q4 of 2007, there were 2,210 complete but unoccupied new homes in active subdivisions, a decline from 2,276 in Q3. Benton County experienced a decline of 3.6% in available complete inventory from Q3 of 2007 and a decline of 29% from Q4 of 2006. Washington County experienced a 2% decline from Q3 of 2007 and a 17% decline from Q4 of 2006. This means that more new homes have been purchased and are now being lived in—a good thing.

In other cases, the negative numbers actually reflect negative factors. From August 16, 2007 to November 15, 2007, there were 1357 existing homes (as opposed to new construction) sold in Benton and Washington Counties. This is a decline of 23.9% from the same period in 2006. This means that there were fewer re-sale homes sold in this time period of 2007, compared to 2006.

Similarly in Q4 of 2007 in NW Arkansas, the average sale price of existing houses declined from Q4 of 2006 by 2.2% in Benton County but it increased by 4.6% in Washington County.

In related news (drawing on data from the Arkansas Realtor Association and other sources), the two local newspapers report that NW Arkansas is better off than other parts of the country. A Morning News article cited data indicating that home prices in Benton County actually increased in 2007 by 1% compared to 2006, while in Washington County prices remained flat. The bad news is that there was a substantial decrease in the number of home sales in Washington and Benton Counties, and homes stayed on the market longer. In 2007, according to the Morning News, the number of home sales decreased by almost 20% in Benton County and by just under 11% in Washington County compared to 2006. Nevertheless, 2007 was the 3rd best year in history for home sales in the two counties.

Another article in the Arkansas Democrat Gazette confirms that statewide the number of homes sold dropped by 8.9%, but that was only about 10% below 2005 home sales, which was the best year in history. Home prices statewide did not decline but remained steady in 2007, unlike other parts of the country.

In my opinion, the continuing high inventory may put some downward pressure on home prices. But this is a necessary correction. In past Skyline Reports, Deck has indicated that the expected decline did not occur in 2007, and the newspaper reports indicate that prices remained steady in ’07 (good news for sellers). Even now, although there has been a decline in the number of homes sold and homes are staying on the market longer, buyers shouldn’t necessarily expect to be able to have so-called “low-ball” offers automatically accepted.

It IS a great time to purchase a home, but buyers in NW Arkansas must also be realistic. Real estate is essentially local, and NW Arkansas trends are generally better than what is reported in the national media. We have a healthy market in which construction and development has slowed in order to get the current high number of new homes sold. A correction is occurring, but it’s not anything close to the “doom and gloom” that is reported nationally.

The key to making a smart home purchase in any market is an experienced real estate agent who knows the market. And even if the agent doesn’t know as much as he or she should, buyers should ask him/her to do a market analysis on the home they decide to purchase. There are still some overpriced homes out there, but most sellers--who listen to their agents—have started to price their homes competitively.

And for sellers, there is usually a range of prices at which a home can be listed. Sellers should price their homes at the lower end of that range in order to be competitive now. It doesn’t matter what a seller has in the home, the market ultimately determines the value. And if an offer comes in that is less than ideal, accept it anyhow. There are so many homes for sale that buyers may just move on to their second choice home, and sellers may end up waiting for months more to get another (probably lower) offer.

I’m still working on my own market report for 2007, so for now I need to depend on statistics from other sources. I’ll have more analysis when I get my own report done in the near future.

For more information:

http://www.nwaonline.com/articles/2008/02/14/business/021508stablehomeprice.txt
http://www.nwanews.com/adg/Business/216877

Way to Go, Mayor Womack!

I attended the annual business luncheon last Friday (Jan. 18) at the John Q. Hammonds Convention Center in Rogers, sponsored by the Center for Business and Economic Research of the U of A (more on this in a future post).

As I zipped up I-540 from Fayetteville I made good time, since it was before mid-day. But then I arrived at the Pinnacle Hills Parkway exit. Cars were backed up at a standstill so that it took almost 1/2 hour to go from where the northbound exit ramp leaves I-540, under the freeway to where the newly widened street turns left onto Pinnacle Hills Parkway. The way the stoplights were adjusted, only a few cars could turn left at each light, so that there were even more cars behind me still "parked" not only on the exit ramp, but a good ways down the freeway.

As I arrived at the intersection to make a left turn onto Pinnacle Hills, a gentleman in a black overcoat entered the scene and began directing traffic. He blocked part of the traffic going south on Pinnacle Hills so that people from the freeway exit turning left to get to the meeting could proceed more smoothly. With more than 1,000 business people in attendance, the traffic bottleneck made a lot of them late. I did get there on time, but just barely. As I was leaving, I chatted with another person from the luncheon who told me that the man directing traffic was Rogers' Mayor Steve Womack and that he did "stuff like that" from time to time.

I applaud Mayor Womack's initiative in taking charge of the situation and making sure business people got to this important annual economic event (if it was him--I'm not sure since I have never met him personally). But the incident points out the continuing problem of infrastructure keeping up with growth in NW Arkansas, particularly with regard to transportation.

Following are a few updates on various transportation/infrastructure projects for NW Arkansas:

The exit for Pinnacle Hills Promenade Mall is open from northbound I-540 but the overpass to the west side of I-540 and the exit from southbound I-540 are not. If the overpass had been finished, the traffic delay I encountered would probably not have happened.

In southwest Rogers, work is under way on Pauline Whitaker Parkway, a north-south street that will connect with the Promenade interchange on the west side of I-540, providing access to the new Mercy Medical Center, which will open in March. According to the current timetable, the road should be completed in May.

Several other north-south road improvements will soon be open in Rogers.

Bentonville is also busy widening roads, improving interchanges, installing drains, and working on concepts for future projects. As hard as the city works, it’s almost impossible to keep up with the need for more infrastructure.

One bright spot is the cities of Rogers and Bentonville partnering on some projects that affect both.

Bella Vista will, unfortunately, have to struggle with its traffic bottleneck long into the future. U.S. Hwy. 71 carries all interstate traffic right through the middle of town. A bypass connecting Arkansas and Missouri has been studied for years but now seems dead in the water. The latest estimates show a $139 million shortfall between construction cost and projected income from tolls. That report caused Missouri to reassign the funds they were planning to spend for their portion of the connector.

Springdale is going full speed ahead on three east-west corridors to relieve traffic on U.S. Hwy. 412. The city and voters alike are to be commended for their foresight and planning. Voters approved a 1% sales tax in 2003 to back $105 million in bonds and the city has been constructing roads non-stop. In light of ever-increasing inflation and growth, that vote was a good move.

In November 2007, the first section of the southern corridor between 40th and 48th streets opened. When complete in spring of 2009 the southern corridor will run from 48th Street to Butterfield Coach Road, which is currently the eastern edge of the city limits.

The northern corridor, which is located near Wagon Wheel Road, is scheduled for completion in the first half of 2009.

Portions of the central corridor have been complete for some time. The phase that will connect Hwy. 71B to Old Missouri Road is scheduled to finish in November 2008. The third phase of the central corridor that will connect Emma Avenue to Robinson Avenue on the eastern side of the city is scheduled to be complete in May 2009.

The Arkansas Highway and Transportation Department opened a new, wider 6-mile section of U.S. 412 near Hindsville. If and when all the planned improvements are made to U.S. 412, it will be a 4-lane highway from the Oklahoma border east to Huntsville. The state is also planning to widen a 1.6-mile stretch of Old Wire Road in Springdale from Randall Wobbe Lane north to Arkansas 264. No work is evident here yet.

Fayetteville is also busy improving roads but perhaps not on the same scale as some of the other cities. Portions of Wedington Drive are being widened and, it seems to me, moving along at a good pace. As I recall, it took some five years to widen about three miles of Hwy. 265 so I am impressed with the progress I see on Wedington.

And on the subject of Hwy. 265, Fayetteville has been notified by the state transportation department that it wants to proceed with widening that highway from Mission Boulevard north to Joyce Boulevard. Earlier plans had called for a 4-lane highway north to the Springdale city limit but inflation caused those plans to be scrapped.

Meanwhile, plans for public transportation on a major scale are sorely lacking. Ozark Regional Transportation provides some bus service on fixed routes in Fayetteville and Springdale. A few routes in Rogers and Bentonville are scheduled for this year. Sadly, a route from Springdale to Lowell to Rogers was canceled recently due to lack of funding.

Razorback Transit at the University of Arkansas in Fayetteville provides free bus service for the area around the campus and to the Northwest Arkansas Mall.

It seems to me that serious consideration must be given to improving public transportation on a regional scale (think light rail or funding for a beefed-up bus system). I don’t pretend to be a planning engineer but I do know congestion, traffic delays, and gridlock when I see it. Every once in a while I hear “light rail” being tossed around but I haven’t see any firm projections.

For more information:

http://www.bentonvillear.com/docs/street/street_newsletter_120107.pdf
http://www.rogersarkansas.com/planning/2010Bond.asp
http://www.nwarktimes.com/brog/News/55678/
http://www.nwanews.com/adg/National/201929/print/
http://www.joplinindependent.com/display_article.php/l-marble1192477593
http://www.nwaonline.net/articles/2007/12/05/news/120607sz412eupdate.txt
http://www.ozark.org/RidingORT/home.html

No Increase in Millage Rates

It appears the cities, counties and school districts that were all talking last fall about the necessity to raise taxes have found ways to keep that from happening – at least for another year.

If you’ll scroll down to the article I posted October 22, 2007, “Will Property Taxes Increase in Northwest Arkansas?” you’ll see that the gist of the matter was that sales tax revenues were down, bridges were falling apart, and school districts needed new schools.

Most of the councils had to work hard to reach consensus about what to cut while still providing necessary services. But the good news is they did their job - just as families are forced to do when income goes down.

The overall picture is now a little brighter. The latest report (October 2007) of Fayetteville’s sales tax receipts shows an increase of 3.8% compared to same month in 2006. The general opinion is the opening of Sam’s Club and Malco’s state-of-the-art movie theater all significantly improved Fayetteville’s revenue stream. However, Fayetteville is the anomaly for that time period. Bentonville’s receipts decreased 8.86%, Rogers down 6.11%, and Springdale down 6.17%.

Washington County Quorum Court says it has depended more on property taxes and less on sales tax receipts for the past several years. When income was greater than expenses, the county squirreled money away so that it now has approximately $15 million in reserve.

City of Rogers ended its fiscal year with a huge reserve. Not only did the city bring in more revenue than projected, it managed to decrease expenditures. Wouldn’t it be great if that feat could be accomplished throughout the area?

Another thing that helped avoid a millage increase is the increased assessed value of property in NW Arkansas. Naturally as values increase, tax revenues increase but Arkansas has laws to keep those increases from getting out of hand. Amendment 59 to the Arkansas Constitution states taxes cannot increase by more than 10% from the previous year, excluding newly discovered or constructed properties.

The bottom line is some entities, such as Washington County, have had to actually decrease the millage rate 0.2 mills from the preceding year. The rate has been set at 6.6 mills.

Millage rates in Washington County can be viewed by going to http://www.co.washington.ar.us/ then click on Information, then scroll down to Millage Rates.

Benton County does not have a list of millage rates on its website but reviewing the faxed copy I received, I think it’s fair to say the majority of entities in Washington County have slightly lower millage rates than those in Benton County.

For more information:

http://www.nwaonline.net/articles/2007/10/29/news/103007szbudget.txt
http://www.nwaonline.net/articles/2007/10/30/news/103107fzcmill.txt
http://www.nwaonline.net/articles/2007/11/18/news/111907bzschoolboardadv.txt
http://www.nwaonline.net/articles/2007/12/28/news/122907fzwaschofinances.txt
http://www.nwarktimes.com/brog/News/55839/
http://www.nwaonline.net/articles/2008/01/02/news/010308fzsalestax.txt
http://www.nwaonline.net/articles/2008/01/03/news/010408fzwaschoqc.txt
http://www.nwarktimes.com/nwat/News/60850/

Volunteer Fire Departments in Northwest Arkansas

An interesting subject crossed my desk this week and gave me something to think about that I usually give no thought to – volunteer fire departments. Why do we have them, what do they do, and how are they funded?

Volunteer fire departments exist to help people in need. Large areas of both Benton and Washington counties are not incorporated. In other words, mile upon square mile of homes, businesses, and roads that are not located within a city or town. Buildings catch fire and accidents happen regardless of man-made boundary lines.

Trained volunteers stop whatever they’re doing to respond to each emergency. The volunteers are just that - they receive no pay for their services.

But fire trucks, maintenance, fuel, insurance, hoses, fire-fighting suits including boots, hats, gloves, and respirators are all very expensive. Buildings are needed to store the equipment and those buildings require utilities, insurance and maintenance.

All of this is funded on a volunteer basis as well. Residents are expected to pay dues to support their fire departments but many do not pay. From what I understand, considerably less than half the property owners actually pay the dues. The fire department must respond whether dues were paid or not. Obviously the non-payers get a free ride.

Pancake breakfasts, chili suppers and donations all help raise needed funds but the majority of the money comes from annual dues.

One Washington County volunteer fire department has decided to try a new way of having everyone pay his or her fair share.

Nob Hill Fire Department serves some 85 square miles in the northeastern part of the county. Dues were $25 annually for many years but had to be increased to $40 in 2007.

Nob Hill asked for and received permission from Washington County Quorum Court to hold an election on January 8th. If voters approve, the $40 membership dues would be added to property tax bills in the fire service area.

Paying the dues would then be mandatory. The revenue stream going to the volunteer fire department would increase significantly without increasing the annual dues.

The whole thing makes sense to me. The amount paid would not change, only the method of payment. There’s nothing fair about less than 50% of the people paying for a service everyone can use. All property owners inside city limits pay taxes for fire service. Why should it be different outside city limits?

With more than twenty volunteer fire departments in Washington and Benton counties, the Nob Hill Election will be closely watched. If it passes, there’s no doubt in my mind other departments will follow suit.

For more information:

http://www.nwaonline.net/articles/2008/01/02/news/010308sznobhillelection.txt

Happy Holidays!

NW Arkansas Weathering the Mortgage-Crisis Storm

According to an article published in the last few weeks in the Arkansas News Bureau, the mortgage crisis in Arkansas is not as severe as national media would have us believe.

Governor Mike Beebe is quoted as saying, "I've talked to the state bank commissioner about the housing market and have been assured that Arkansas bankers, lenders and consumers have been more responsible than those in some other parts of the country."

Arkansas was ranked 17th nationally in foreclosures in October 2007, which was about the same as a few years ago during the boom according to RealtyTrac, an on-line marketplace for foreclosure properties.

There is some debate as to whether sub-prime lending caused the foreclosures or adjustable rate mortgages resetting at considerably higher rates. But another thing to consider is the number of builders being foreclosed due to overbuilding in our area as opposed to individual homebuyers.

Whatever the answer, the effect of foreclosure sales is downward pricing. For the most part, although prices have decreased due to supply and demand issues (i.e. oversupply of homes) as well as some foreclosures and sales of bank-owned properties, I don’t think we’ve encountered the level of price decreases in NW Arkansas that other parts of the country are experiencing.

The result is that this is probably the optimum time to invest in real estate in NW Arkansas—despite the negative stories in the national media. With prices lower, a huge selection of homes on the market in all price ranges, and low interest rates, I would suggest that buyers get off the fence and start buying before interest rates creep up again and the supply of homes diminishes, resulting in higher prices.

But buyers do need to be careful. There are a lot of overpriced properties out there, as some sellers haven’t gotten used to the current buyer’s market yet. A reputable buyer’s agent will do a market analysis for his buyer to determine a fair market price.

For sellers, it’s important to work intelligently with their agents when an offer does come in. If the seller doesn’t want to accept a particular offer he may lose the sale. In this market a counter offer from the seller may make the buyer select a different property and an opportunity to sell the home quickly may be lost. Buyers hold the winning cards now and there are a lot of homes to choose from.

For more information:

Read my blog posting October 6, 2007 “What’s the Mortgage Crisis All About?”

http://www.arkansasnews.com/archive/2007/12/05/News/344272.html

No Shortage of Hotel Rooms in NW Arkansas

Have you ever given much thought to whether there are enough hotel/motel rooms in a given area? If you’re like me the answer is probably “No.”

We’re all used to seeing these establishments but I was surprised to learn recently just how many rooms are available in our area and how many more are under construction.

Currently there are some 7,000 rooms in the four cities of Bentonville, Rogers, Springdale and Fayetteville. In the next six months, as many as 1,000 more will be ready to serve travelers.

Bentonville has the highest occupancy rate of all – 95% on Monday through Thursday nights. That’s understandable when you consider all the business people who come to town to do business at Wal-Mart’s home office. On Friday, Saturday and Sunday nights the occupancy drops off appreciably.

Fayetteville normally has a higher occupancy rate on weekends than weekdays but except for University of Arkansas sporting events and Bikes, Blues, and Barbecue it’s probably fair to say that city does not enjoy occupancy rates approaching 95%. But that doesn’t seem to slow construction of still more hotels.

Rogers expects to add at least 300 more rooms when several establishments are completed in 2008. That will bring their count to some 2,500 rooms.

Springdale has approximately 1,500 rooms and will no doubt need more when the new baseball stadium opens next spring.

I am just amazed at these numbers and what it all means to the overall economy of NW Arkansas!

For more information:

http://www.nwarktimes.com/adg/Business_Matters/205961/

Housing Market Trends in NW Arkansas—Part 1

The main question that people ask me these days is “how’s the market?” With all of the doom and gloom in the national media about the so-called “housing slump” and the “mortgage meltdown”, it’s possible for sellers to be very pessimistic about selling their homes and for buyers to be hesitant about making such an investment now. But real estate is local, so national trends don’t necessarily reflect what’s happening in NW Arkansas.

In a recent training video to help agents deal with the current shifting market, Gary Keller, founder of Keller Williams Realty, gave the best explanation I have heard to help understand what is happening now. I will try to summarize:

1. The real estate market and the economy as a whole are cyclical. We’ve had down markets before, and it’s inevitable that the market will turn around again and improve. The question now is when that will happen.

2. The past several years have constituted an unprecedented up cycle, with the number of sales and increase in prices steeper than normal. This means that prices may fall more than usual and more sharply before this is all over. For each local market, where we are in this cycle depends on local factors.

3. National trends touted by the media don’t necessarily apply to all local areas. What national trends are is an average of all of the local trends from all over the country. Each local market is different, and the situation here compared to California or other states may vary radically; there are even local markets which do not mirror the national trends and where prices have been falling during the past few years and are now rising.

4. With regard to the crisis in the mortgage industry, aggressive lending policies during the past several years brought many additional buyers into the housing market who possibly should not have been there. These were people with marginal credit who normally would not have been able to get financing to purchase a home. But because lenders were offering them zero-down or low-down-payment loans at higher interest rates but very low introductory rates (sub-prime loans), these people purchased homes, thus contributing to the steep increase in prices. But now the first adjustment of these ARM (adjustable rate mortgage) loans have put the interest rates very high and the borrowers can’t make the new payments, resulting in the record number of foreclosures.

5. This market correction will not necessarily end soon and depends on balancing home prices with affordability. In a normal economy, usually the median home price and median income for a particular area match up; increases in income and home prices occur incrementally, each inching up little by little. However, the spike in home prices during the past few years far outpaced salary increases for most folks. Now we’re at a point where home prices are extremely high and income levels of people possibly wanting to purchase a home have not increased significantly to match the high home prices. What this means is that home prices must come down to “affordability” levels, and normal cost of living salary increases will eventually put home prices and income back in balance. This could take awhile—how long will depend on where each local real estate market is with regard to the cycle.

The housing market in NW Arkansas began its correction about a year ago in Washington County and in the first quarter of 2007 in Benton County. Thus we’re well into the buyer’s market that has resulted from the correction. The past few years of housing boom was a seller’s market.

Ultimately it is not a question of a good market vs. a bad market. The market is the market. Well-priced homes are still selling while overpriced homes are sitting on the market, so sellers may have to adjust their expectations. But buyers are still buying; in October the number of home sales in Fayetteville was 69, only 5 less than in October of 2006.

For both buyers and sellers the rules have changed compared to the last several years of “craziness.” My advice is to seek out a real estate agent who understands these trends and can help navigate the changing housing market in NW Arkansas.

Housing Market Trends in NW Arkansas—Part 2

As I mentioned in Part 1 of this Housing Market Trends Report, real estate is local.

And two reports out last week point to encouraging trends in the real estate market in Benton and Washington Counties. The 3rd quarter Skyline Report and the 3rd quarter report on the economy were both released by the Center for Business and Economic Research at the University of Arkansas.

The numbers show a continued decrease in new residential building permits and improving absorption rates, both of which indicate positive movement for the Northwest Arkansas housing market.

One of the reasons for the current buyer’s market is that there is a very high number of homes on the market. In real estate terms, this is called “high inventory”. To get back to a somewhat balanced market it is necessary to decrease the number of homes on the market compared to the number of buyers.

Everyone has heard of the law of “supply and demand.” Low supply and high demand drives up prices. This was the situation of the past several years, where in order to meet the high demand, builders and developers created many new neighborhoods and built a lot of new homes. Unfortunately now, there is a huge supply (high inventory) and fewer buyers, which drives prices down. But trends in NW Arkansas as indicated by 3rd quarter data do show some positive trends.

For 3rd quarter (July through September 2007), Benton and Washington Counties saw a 5.6% drop in the number of complete-but-unoccupied homes from 2nd quarter of 2007. That’s good news in itself, but even better is that the 3rd quarter 2007 saw a 23% drop from the same period of 2006.

Put another way, in the 3rd quarter 2007, 2,276 complete-but-unoccupied houses in Benton and Washington Counties were available compared to 2,411 unoccupied homes in the 2nd quarter of 2007. This represents a decline of 8.8% in available complete inventory from the 2nd quarter to the 3rd quarter of 2007 in Benton County and a decline of 31.7% from the 3rd quarter of 2006. For Washington County, there was actually a 2.3% increase in inventory over the past quarter and a cumulative increase of 7.7% over the past year. For NW Arkansas as a whole, comparing 3rd quarter 2007 to the same quarter of 2006, the number of complete-but-unoccupied new homes dropped from 2,956 to 2,276.

The absorption rate was better in Benton County than Washington County, which is not too surprising when one considers the dynamic growth that Benton County has experienced. Washington County is a more mature market and while there’s no doubt it too has exploded in recent years, the demand has not been quite as intense as Benton County.

This probably also explains why Washington County home prices have dipped a bit in the past months while Benton County house prices have increased slightly. The average selling price of a home in Benton County increased 1.54% to $192,132. In Washington County the average price decreased 1.83% to $181,796 from $185,130.

Building permits issued in the two counties declined 33% in the 3rd quarter 2007 from the 3rd quarter 2006. A total of 653 residential building permits were issued in the two-county area during the third quarter of 2007, while the average value of new residential building permits remained unchanged at slightly under $165K.

All this points to a general improvement in NW Arkansas. Steady demand for new and existing homes coupled with a decrease in new building permits will help decrease inventory and aid in normalizing the market.

The local situation therefore is not as bleak as the national media would have us believe. It’s actually a very good time to purchase a home here.

1. Prices have decreased, while inventory is still high enough to afford buyers a good selection of homes.

2. The number of new jobs in NW Arkansas continues to increase by about 5,000 annually (3%). But Arkansas as a whole had a disheartening job growth rate of only ½ of 1%.

3. Mortgage rates have dropped somewhat and that will help people qualify to buy more home for the same monthly payment.

4. Less expensive homes are moving at a much better rate than homes costing more than $250,000.

It is also interesting to note that vacancy rates in multifamily housing are increasing throughout the area. Vacancy rates in this type of housing are very cyclical and will undoubtedly improve as the overall market improves.

Many new retail, office, commercial and industrial projects have come on board in the past year so it isn’t surprising that vacancy rates are also increasing in this sector. As buildings sit empty, downward pressure is exerted on rent prices, which may be very tough on developers who completed buildings at record high construction and land costs.

For more information:

http://www.nwanews.com/adg/Business/207770/

http://www.nwanews.com:80/adg/Business/207673

http://www.nwanews.com/adg/Business_Matters/207447

http://www.nwanews.com/adg/Business/207581

http://www.arkansasbusiness.com/article.aspx?aid=100929.54928.113057

http://www.nwaonline.net/articles/2007/11/12/news/111307azskyline.txt

http://www.nwaonline.net/articles/2007/11/13/business/111407homesale.txt

New Zoning Regulations in Rural NW Arkansas

If you live in NW Arkansas, I’m sure you heard much talk about the rock quarry proposal for the southwest part of Washington County. Debate was loud and lengthy. The end result was the rock quarry could proceed because the county had no zoning regulations to stop it.

And it was just about one year ago that the Quorum Court took action to regulate density around existing city limits. That law established 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.

Now the Court, by a 7-6 vote, has passed an ordinance that zoned all unincorporated portions of the county as agricultural. Residents of the rural areas will now have some say about what is built in their neighborhoods.

The ordinance amends the zoning regulations passed last year. Anything other than a single-family home on at least one acre will be required to go before the Washington County Planning Board to make the case for a conditional-use permit.

Since November 2006, the Planning Board has considered 19 proposals and denied only two: one was a subdivision with 5 homes per acre and the other was to construct storage warehouses in a residential area.

So it seems to me that the new zoning regulations actually protect property values. I know I would not want a rock quarry, smelter, red-dirt pit or noisy factory situated next door to my home, and I don’t know anyone else who does.

In the debate over the most recent decision of the Quorum Court, the usual cry arose from some of the old timers who don’t want anyone telling them what they can do with their land. I think it’s time everyone realized that NW Arkansas is being coming more urbanized every day and rules and regulations are necessary to ensure an orderly society.

I’ll even go so far as to say that I believe it might even be time for building codes in rural areas. It’s not the law yet, but I’ve seen homes in the county that are practically impossible to sell because they were not “built to code.” Buyers these days almost always hire a professional building inspector who has the skill to know good from bad in such things as electrical wiring, plumbing, and structural safety.

Substandard buildings can also be hazardous to the inhabitants. There was a fire several years ago in such a home in Washington County where several small children were killed as they slept.

I don’t ever want to read sad headlines like those again. Laws are generally to protect the people, and I think the Washington County Quorum Court has shown remarkable restraint in trying to balance traditional values with the needs for orderly growth.

For more information:

Refer to my blog archives for article posted November 23, 2006

http://www.nwarktimes.com/nwat/News/59069/

Adjusting to Realty in the NW Arkansas Real Estate Market

As the real estate market continues its struggle, buyers and builders alike have to adjust. While driving around NW Arkansas these days, I see subdivisions in various stages of incompletion. Some have a few homes occupied, some subdivisions have been stopped dead in their tracks and the land put up for sale.

At the same time, other subdivisions have undergone revisions and homes are selling like hot cakes.

My take is that some of the higher-end, expensive subdivisions have a long way to go before they will be completed and occupied. Many are mostly empty or at the most half full, especially in Benton County. These were originally planned for large homes with all the amenities on large lots with many restrictive covenants to help maintain a buyer’s investment and life style.

In a concession to the reality of the housing market in NW Arkansas, some builders have revised sizes and costs downward. That’s a hard thing to accomplish. Not only is city approval usually required, but existing property owners have to agree to a relaxation of the covenants.

Smaller houses on smaller lots can affect the value of the larger homes that were built according to the tighter covenants. However, this can be accomplished without sacrificing the value of the larger home if it is done with thought and sensitivity.

I know of one subdivision, for example, where a developer purchased the land, received approval from the city to reduce minimum home size in the covenants, and is now building smaller, more affordable homes. The quality of these homes is excellent--all brick with many amenities of larger homes such as granite counter tops, fully sodded yards, etc., all for about $150K or less. These homes are "selling like hotcakes" in the midst of a supposedly a "slow" market.

Seems to me it’s far better for builders and developers to face reality, reduce costs, and sell homes than to be in a subdivision that sits empty save for one or two homeowners.

And for buyers, I would be leary of purchasing a home in a subdivision with a large number of empty lots or a subdivision where there are a lot of finished homes for sale but few or none have been sold. At some point in the future, a current buyer will want to sell that home, which will be difficult if new homes being built then are on the market and competing to be sold.

In this uncertain market with so many homes for sale, it's particularly important for a buyer to be represented by a knowledgeable buyer agent (like me for example ). In Arkansas, for homes listed by a realtor, there's no extra cost to the buyer to have his own agent, and the buyer's interests are protected.

Buyers should also ask their agents to do a market analysis, as well as to research the history of the home (and subdivision) they have selected, in order that they don't pay too much. Prices are not what they were a year ago, but some sellers haven't gotten the idea yet.

And there are a lot of bank-owned properties out there (foreclosures anyone?) where the home is sold "as-is". So-called "short sales" may be some good deals in this regard. The buyer's agent can advise the buyer how to proceed and what his rights are in the transaction.

For more information:

http://www.nwarktimes.com/adg/Business_Matters/205964/

Will Property Taxes Increase in NW Arkansas?

There’s been a lot of talk lately about the need to increase taxes in our area. The City of Fayetteville, Fayetteville School District, Benton County and Washington County have all mentioned the possibility of higher taxes and the talk seems to be getting louder all the time.

First, let me explain how taxes are determined in Arkansas. One mill is 1/10 of one cent ($.001). The value for tax assessment is 20% of fair market value, which is then multiplied by the effective millage rate. This applies to real estate (homes) and personal property (vehicles, boats and other similar items). A home with a market value of $100,000 would be valued at $20,000 for tax purposes. For example, property within Fayetteville School District and the City of Fayetteville in 2006 was taxed at 50.70 mills. Multiplying $20,000 x .05070 equals a tax of $1014.00.

The City of Fayetteville says it will probably need a 0.9-mill increase to compensate for falling sales tax revenue.

Fayetteville School District says it will need a millage increase of 4 to 10 mills in the not too distant future to build a new high school.

Washington County needs money to replace bridges, one of which has been closed to all traffic and three more bridges need major repairs. This has caused county officials to seriously consider raising the road tax to 3 mills, an increase of 1.9 mills.

Benton County is thinking about a sales tax increase to cover the expenses of moving juvenile detention and court facilities.

As you can see, there are many reasons for possible tax increases and just as many pros and cons. I don’t have the space here to go into all the ramifications, but quality of life has to be given serious consideration. Without street improvements, good schools, adequate police and fire protection, clean air, parks, etc., quality of life decreases.

Higher taxes make most people unhappy. No one ever asks how much more they should pay yet most of us complain about gridlock on the roads or not having immediate response when we need a police officer.

I read recently that Fayetteville City government may cut cost-of-living adjustments for employees in order to lower the tax increase. I have to agree with police and fire fighters – that’s not the best way to balance the budget. City employees deserve to have their wages keep up not only with inflation but also with pay scales in similar cities. We don’t want to lose good, experienced police, fire fighters, and city workers.

Washington County reassessed all real estate in 2007, which resulted in higher appraised values for nearly every parcel. The increased value will be reflected on next year’s tax bills and means higher taxes even if the millage rate is unchanged.

Sam’s Club moved from Springdale to Fayetteville just a few weeks ago. Naturally, that means more sales tax revenue for the city. Malco Movie Theater just opened its brand new, state-of-the-art, digital 12-screen theater in Fayetteville, which is also expected to bring in more sales taxes. But these two new sales tax sources will not make up for the reduced level of revenue from sales taxes in Fayetteville.

Another factor to keep in mind is that Fayetteville is the lowest taxing city of any of the major towns in NW Arkansas, according to Mayor Dan Coody. And a modest increase in the millage now may prevent a larger increase in the future.

Some government entities have money in reserve accounts. I know we have to have money in the “rainy-day fund,” but dark clouds are already gathering.

The needs are numerous, expensive, and easy to justify. Maybe we need to face reality and dig deeper into our wallets.

For more information:

http://nwaonline.net/articles/2007/10/14/news/101507fzmillage.txt

http://www.nwaonline.net/articles/2007/10/11/columns/brenda_blagg/101207blagg.txt

http://www.nwarktimes.com/nwat/News/58291/

http://www.nwarktimes.com/nwat/News/58263/

http://www.nwarktimes.com/nwat/Editorial/58200/