Surplus of homes shrinking in region
Posted on Thursday, August 21, 2008
A 35 percent drop in the number of unoccupied new houses over the past 12 months keeps Northwest Arkansas economists optimistic that the housing market is slowly recovering from the doldrums of the past two years. Selected results of the Skyline Report’s residential real estate survey released by Arvest Bank Group on Wednesday show that the oversupply of newly completed housing in the second quarter of 2008 is slowly being sold in Benton and Washington counties. The Skyline Report is a quarterly survey of the real estate market in the two counties by the University of Arkansas at Fayetteville’s Center for Business and Economic Research and commissioned by Arvest. The second quarter of the report covers May, June and July. The two counties had 1, 566 unoccupied new houses in the second quarter, down from the 2, 411 counted in the same quarter of 2007. Second-quarter figures were down 17. 1 percent from the first-quarter 2008 number of 1, 889, the report shows. The number of unoccupied new homes is an indicator of the supply and demand equilibrium in the residential market, economists said. Center director Kathy Deck said the economists are walking a fine line between concern for the real estate market and optimism that the economy will soon see some notable improvement. “We remain optimistic that there is a demand for new housing. When we look at demand, we are looking at job growth,” Deck said Wednesday.
NEW JOBS, NEW HOUSES Northwest Arkansas has a current job growth rate of about 1 percent annually, which is up from the zero job growth it has seen for the past year, Deck said. “That doesn’t sound like much compared to some of our past numbers, but that continues to be positive demand,” she said. “The next few months will continue to see a moderate growth that will get us out of this slow market.” State unemployment was at 4. 5 percent in July, according to U. S. Bureau of Labor Statistics information released Friday, well below the national rate of 5. 7 percent. The latest available report for the Fayetteville-Springdale-Rogers Metropolitan Statistical Area, which covers Benton, Washington and Madison counties in Arkansas and McDonald County, Mo., shows 4. 3 percent unemployment for June when the state was at 5. 3 percent.
Northwest Arkansas has historically recorded unemployment rates about 1 percent lower than state rates.
Deck told the Arkansas Democrat-Gazette on Friday that the state has gained 7, 400 jobs, or about 1. 4 percent of the nonfarm work force, since July 2007.
She said the government, the professional and business sector, and the educational and health services sector have done well, but other areas are not as strong.
“What gives me heartburn when I look at the figures is the trade, transportation and utilities sector. That is the largest part of our economy, about 25 percent. Because it is so big, that is what has been holding us back,” she said Wednesday.
That sector is very consumer driven, so negative consumer sentiment can adversely affect employment, she said. from the second-quarter 2007 average of $ 187, 323, the report showed.
The average sale price of existing homes in Washington County at the end of the second quarter was $ 184, 158, down 2. 4 percent from the first-quarter average of $ 188, 621 and an increase of 5. 3 percent over the second quarter 2007 average of $ ®, 959, according to the report.
The downward price pressure is necessary to bring the supply and demand sides of the residential market back into balance, Deck said.
Paul Bynum, owner of Mount Data real estate information company that covers Northwest Arkansas, said the area’s residential market continues in an “unhealthy” state.
Bynum said that about 70 per-“ When the [the consumers ] feel better, we’ll feel better all around, ” she said of the economy.
LOWER PERMITS, PRICES Building permits for the second quarter totaled 416 for both counties, down 44. 1 percent from the 744 in the same quarter last year. The second-quarter figure is up 16. 9 percent from the first quarter’s 356. “I would call the quarter-overquarter increase seasonal. This is prime home construction time,” Deck said. “Even at depressed levels, the market will show some seasonal fluctuation.” The average sale price of existing homes in Benton County at the end of the second quarter was $ 181, 215, an 8. 2 percent drop from the first-quarter average of $ 197, 496 and a 3. 3 percent drop cent of the available residential properties on the market need to be priced below $ 200, 000 to be affordable by people with the average income in Northwest Arkansas. His records show that only about 62 percent of the available houses are so priced. He said existing house average sale prices, according to his records, have dropped about 3 percent year over year since 2006. New housing average sale prices have been more stable, dropping about 8 percent in 2007 from 2006 averages but only about 0. 5 percent in 2008 over 2007 averages. “That’s a very stable price market as far as new construction is concerned,” he said.
To contact this reporter: sroberts@arkansasonline. com
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