Housing market looks for balance
Posted on Wednesday, May 14, 2008
The number of newly completed but unoccupied houses in Benton and Washington counties fell below 2, 000 for the first time since early 2006, according to economists with the University of Arkansas at Fayetteville.
The Center for Business and Economic Research at the Sam M. Walton College of Business released parts of the Skyline Report residential real estate numbers from the first quarter of 2008 on Tuesday. The quarterly report is commissioned by Arvest Bank Group.
The first quarter covers February, March and April.
The number of completed but unoccupied homes is an indicator of the supply and demand equilibrium in the residential market, economists said.
That the number of such houses fell 30. 34 percent from the 2, 775 reported in the first quarter of 2007 to 1, 933 shows supply and demand is working its way to a balance, said Kathy Deck, the center’s executive director.
The first quarter of 2006 was the first time the number of complete but unoccupied houses in Northwest Arkansas rose above 2, 000.
In the first quarter of 2006, there were 2, 084 such houses on the market, up 37. 29 percent from the 1, 518 at the end of the fourth quarter of 2005. The fourth quarter included November and December 2005 and January 2006.
Also good news is that building permits for new residential construction dropped 67. 38 percent over the past two years. In the first quarter of 2006, there were 2, 419 new housing starts and homes under construction. In the same quarter of 2007 there were 1, 247, and in the same quarter of 2008 there were 789 housing starts and under construction, the report states.
Sales of existing homes fell 42. 6 percent from 1, 784 in the first quarter of 2007 to 1, 024 in the first quarter of 2008.
Balancing the supply and the demand sides of the residential housing market requires continued job creation to keep pace with the reduced inventory of homes, economist Jeff Collins said.
Continued job growth attracts people to the area, and new residents require new houses, he said. Collins is a partner in Streetsmart Data Services in Fayetteville.
Deck said about 1, 200 people a month moved into Northwest Arkansas in 2006. In 2007, that number was down 16. 67 percent to about 1, 000 per month.
“Every indication is that 2008 will be about the same as 2007,” Deck said. “Demand has weakened as job growth has weakened.” Sales of new and existing houses in Northwest Arkansas are tracking along with the state and national trends, Deck said.
But new residents, even if fewer than the boom days of 2006, still mean growth, said George Faucette, president of Coldwell Banker Faucette Real Estate in Fayetteville.
“We need to look at the total [number ] of houses available, both new and existing, because that is the market. And the market is picking up a little bit,” Faucette said.
Collins expects at least another 18 months of declining sales and building before Northwest Arkansas returns to a more positive economy in 2010.
“Are we at the bottom ? I guess it depends on how you define ‘bottom’. To me, it is where buyer and seller expectations meet. Sellers have been adjusting their prices downward in the slow market, but buyers are putting offers in that are 10 percent to 20 percent below the asking price. That is a large disparity between expectations,” Collins said.
Faucette said it is normal for buyers, in a heavily advertised buyers’ market, to try to get a bargain when buying a house. “But that is assuming that any buyer will be satisfied with any one of five houses. But buying a home is an emotional decision. There is a lot more to consider than just the best price,” Faucette said. The Skyline Report shows Northwest Arkansas also has 27, 080 lots in active subdivisions and another 18, 621 lots at least preliminarily approved for development. Deck, Collins and Faucette agree that a large number of those lots will not be developed until five to 10 years from now. “Between 20 percent and 30 percent of those should be discounted from the current market,” Collins said. Deck said new construction will be developed and occupied before some of the lots sitting on the market will be completed.
To contact this reporter: sroberts@arkansasonline. com
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