Northwest Arkansas: 'Somebody Turned the Water Back On'

Real estate agents have a wealth of data at their disposal to describe the relative strength or weakness of their local housing markets. They can illustrate their point with sales-to-list price ratio, days on market, increase or decline in pricing and a number of other variables.

David Mix, broker and co-owner of Bassett Mix & Associates of Fayetteville, first opts for a simple, but effective description of what he is seeing these days in Washington and Benton counties.  

“It’s like somebody turned the water back on,” Mix said.

How steady the stream varies, but there are a number of indicators that business is improving for local real estate agents and builders. Home values, home sales, listings and new construction for the first quarter of 2013 are up across the region from the same period in 2012. From the last quarter of 2007 until last year, encouraging signs were few, particularly when compared to the current environment.

Bassett Mix & Associates, for example, turned in a record March with $25 million in sales. That’s more than double the previous high, Mix said, pointing out that the most encouraging part for his agency isn’t the total number but how it arrived at that number. All of the firm’s agents seem to be producing and sales aren’t limited to just a portion of the staff as they were in recent, leaner years.

“That’s a good sign,” Mix said. “You have your pockets of top producers that are always going to produce no matter what. But when your whole staff is producing, that’s when you see a good sign that the market is coming back.” 

Not every northwest Arkansas agency is breaking records, but business is improving throughout the region. Sales are up 12 percent compared with the first quarter of 2012 and 25 percent compared with 2011, according to information compiled by Paul Bynum of Building permits for the area’s four largest towns are also up from this time last year.

This continues a trend that began in the final half of last year, an improvement recently detailed in the Skyline Report, released by Arvest Bank and the Center for Business & Economic Research at the University of Arkansas’ Walton College of Business. Released in March, that study reported a 53 percent increase in building permits for the final half of 2012 compared with 2011. Existing home sales were up nearly 7.5 percent for both Benton and Washington counties, leading Todd White, senior vice president and loan production manager at Arvest Mortgage Co., to declare that northwest Arkansas could soon become a “seller’s market.”

Kathy Deck, director of the Center for Business & Economic Research, said an upswing in the local economy as a whole is helping fuel optimism among buyers. Confidence in the economy and a willingness to invest in new or larger homes is improving right behind job growth. Unemployment in the area is at 5.8 percent, 28 percent below the national average. 

“When we look at the northwest Arkansas economy right now, you really see an economy firing on all cylinders,” Deck said. “You see an economy that is seeing year-over-year job growth … and that leads to good things for construction. Those increases in construction do good things for other industries and it really gets into a nice, virtuous cycle.”

Housing is doing its part to keep the momentum positive.

Relocation of buyers has helped keep the supply of new houses on the rise. And real estate agents note an increase in first-time buyers, who had been afraid to buy during the national economic downturn.

Interest rates are favorable for buyers. Firms are beginning to see 15 and 20 percent growth in sales volume.

Agents are seeing time on the market drop significantly this quarter. Rigo Gomez, Fayetteville sales manager for Lindsey & Associates, said the list price ratios are above 95 percent, meaning sellers are being realistic about how they’ve priced properties and buyers are comfortable with those prices. MountData reports those list price ratios at 98.3 percent for the region.

Northwest Arkansas has seen a nearly 4.5 percent increase in prices with the median value of homes sold at about $140,000, according to numbers distributed by Median prices nationally are at $190,000 with a 0.05 percent price increase from last year. 

Homes are no longer going three to six months before selling. Some listings are lasting less than a week. Multiple real estate agents reported seeing houses sold within 24 hours, though the average time from listing to closing is 55 days, according to MountData. Compare that with 100-plus days in December 2011.

“We’re telling buyers now: If you like it, buy it,” Gomez said. “If you like something and it’s priced well, it won’t be on the market long. That hasn’t been the case for a few years.”

‘Hope People Remember’

Optimism in northwest Arkansas doesn’t come without some caution or hesitation, however. Throughout the region there are reminders of how oversaturated the market got in the mid-2000s.

Subdivisions remain underdeveloped or, in some cases, undeveloped entirely. One Benton County development of 126 lots recently sold for less than $3,000 per lot, one local builder said, noting the cost of developing a lot typically runs between $15,000 and $20,000.

“You hope people remember the fly-by-night developers and builders, cutting up stuff that had no business being cut up,” Sean T. Morris of Walker & Associates Realtors Inc. said. “Hopefully, people keep those examples in mind and move cautiously. Just because you can dig them, doesn’t mean you should.”

Construction prices and tighter restrictions on lending should keep things in check. George Faucette, CEO of Coldwell Banker Harris McHaney & Faucette, whose company reported 22 percent growth in the first quarters of 2013 compared with the first quarter of 2012, said optimism is best as long as it doesn’t get out of control.

“We learned hard lessons in real estate. Homebuilders, the banks and developers learned hard lessons,” Faucette said. “We all have to be smart. Now you hope we don’t all have short memories.”

Deck, the UA economist, also offers a word of caution. While buyers might see conditions favorable to making a home purchase, Deck suggests a thorough review of personal finances prior to getting locked into a mortgage.

“From a buyer’s perspective, it’s a reasonable time to get back into the market,” Deck said. “That said, it only makes sense if it makes sense for the individual buyer. Otherwise, you wind up back where we were with people thinking, ‘I can’t lose.’

“We now know that’s not the case.”