Continued population growth paired with finite residential lot space have pushed real estate prices to record levels this year in booming parts of Northwest Arkansas, raising concerns about the cost of living in the region.
The biannual Arvest Bank-sponsored Skyline report, released Tuesday, said home-price averages in Washington and Benton counties jumped from the first half of 2017 to the first half of 2018 because of pressures caused by growing demand in a region with limited supply, among other trends.
Mervin Jebaraj, director of the Center for Business and Economic Research at the University of Arkansas, Fayetteville, said he is concerned average real estate prices could outpace other economic factors, such as wage growth and inflation, and lead to cost-of-living concerns.
"Affordability is becoming an issue in the residential real estate market," Jebaraj said in a statement about the report.
"With our population expected to continue to grow at a rapid pace, we need to continue building new homes to meet demand, but there are far fewer lots on which to build new homes," he said. "This is especially true within the larger cities in the region where many people desire to live."
Average home prices in Washington County have risen 12.3 percent to $235,618 this year so far, up from $209,899 reported for the front end of 2017. The average home price in Benton County edged up 4.9 percent to $238,098, up from $227,036 for the same period. Jebaraj attributed increased labor and material costs coupled with "limited lots on which to build new homes" as factors for the rise in real estate prices. Regional data spanning from 2013 to 2018 shows the average price of homes rose 35.4 percent in Washington County and 28.4 percent in Benton County over the past five years.
The report offers a snapshot of the latest commercial, single-family and multifamily residential property markets for Benton and Washington counties. The Center for Business and Economic Research conducted the latest study. Center researchers collected data from local governments, property managers, visual inspections and business media for the report.
In the latest results, Johneese Adams, senior vice president and mortgage manager with Arvest Bank of Fayetteville, said the firm is working with property developers to meet the demand for housing as Northwest Arkansas "continues to grow at a steady and healthy pace."
"The tighter supply of homes, coupled with this continued strong demand, makes it increasingly important for homebuyers to get prequalified for mortgages so they can act quickly," Adams said.
Meanwhile, more people are choosing to lease apartments instead of buying homes. Jebaraj said in a statement that apartments tend to be closer to amenities and are considered to be more affordable.
"This, in turn, is fueling the insatiable growth in the multifamily market, which continues to add new multifamily properties at a rapid pace without any sustained increase in the vacancy rate of those properties," he said.
Along with rising real estate prices, total vacancy rates for multifamily properties decreased during the first half of 2018 as a result of new construction, primarily in Fayetteville and Rogers.
A companion study from the university shows that more than 3,500 rental units, or roughly 17 percent of the current inventory, are under construction in Fayetteville. Work on more than 2,100 units, or more than half of the current inventory, is underway in Rogers.
Elsewhere, Bentonville rental vacancy rates increased from 1.4 percent in the first half of 2017 to 6.3 percent in the first half of 2018. Springdale vacancy rates increased to 1.5 percent from 0.6 percent during the same period. Siloam Springs kept a vacancy rate of 1 percent, the lowest in Northwest Arkansas.
Business on 10/10/2018