FAYETTEVILLE, Ark. (KNWA/KFTA) — The real estate market in Northwest Arkansas remains healthy despite the coronavirus pandemic, according to a new report released on Monday.
Arvest Bank on Tuesday released its annual Skyline Report for all three sectors of real estate – residential, commercial and multifamily – in Northwest Arkansas for the first half of 2020
The Skyline Report is a “biannual analysis of the latest commercial, single-family residential and multifamily residential property markets in Benton and Washington Counties,” according to a release from the bank.
The report is sponsored by Arvest Bank and conducted by the Center for Business and Economic Research (CBER) at the Sam M. Walton College of Business at the University of Arkansas.
Mervin Jebaraj, director of CBER, says the real estate market in the region has done well weathering the economic fallout from the COVID-19 pandemic.
“So far the pandemic has not seemed to hurt the real estate market in the region, and the three areas measured by these reports continue to reflect a consistent balance between supply and demand,” Jebaraj said. “Part of that consistency is a continued contraction in the supply of homes for sale across the region, which continues to drive home prices higher.”
In the first half of 2020, the number of homes listed for sale in Northwest Arkansas decreased 48.8 percent compared to the first half of 2019 — from 2,357 to 1,206.
At the same time, available lots on which to build homes fell to 3,896 — the lowest point since the inception of the Skyline Report in 2004.
“It is possibly that the pandemic may have suppressed, or delayed, individuals from listing their homes for sale, but the historic low interest rates for mortgages is enticing many consumers to want to purchase,” Jebaraj said. “Until more inventory is available, it will be difficult for homebuyers to find a home to buy.”
Compared to the first half of 2019, average home prices have risen 8.8 percent in Benton County and 5.3 percent in Washington County. In the previous five years, average home prices have risen 36.1 percent in Benton County and 27.7 percent in Washington County.
In the multifamily market, average rent prices for units increased 4.7 percent from the first half of 2019 to $729.82. According to the report, over the past five years, rent prices have increased 26.5 percent in Northwest Arkansas.
Vacancy rates increased from 3.5 percent in the first half of 2019 to 4.8 percent “as a result of construction of new developments being completed and new units entering the market.”
According to the report, the pace of multifamily construction is expected to remain strong in the near-term with $481.5 million in building permits issued during the past year, a record high for the Skyline Report.
The commercial real estate market has remained stable despite an increase in employees working from home, Jebaraj said, with overall vacancy rates falling across all submarkets from 11 percent to 10.8 percent compared to the first half of 2019.
“At this point it seems that even if the work-from-home trend continues, it will likely not have a significant impact on office space in the region as any potential loss from remote work will be offset by the need for more space per employee,” he said. “We are hearing that many high-density open space plans will likely transition to more cubicles, walls and lower density for safety reasons.”
The retail submarket vacancy rate rose from 9.4 percent in the first half of 2019 to 10.6 percent.
“With many retail establishments feeling the impact of this pandemic, it isn’t surprising to have a small increase year-over-year in this submarket, and we will be watching this particular area closely in the coming months,” Jebaraj said. “It is also important to not that, for the most part, this report doesn’t include the majority of restaurant properties since many restaurants have standalone structures and are not renting space from retail developers.”
The Skyline Report began in 2004 when Arvest Bank contacted CBER to collect information about the local real estate markets
CBER researchers aggregated and analyzed data from local governments, property managers, visual inspections and the business media to “provide a complete picture of the status of property markets in the two counties,” Arvest said in its release.