by Marty Cook
Posted 4/14/2014 12:00 am
Updated 6 months ago
Kevin Riggins insists that eyes can be deceiving when it comes to Waterford Estates.
Waterford Estates at Hissom Ranch was the brainchild of partners Gary Combs and Ronnie Hissom, who dreamed up a tony subdivision along the White River. The community pops up along state Highway 45 about 5 miles east of Fayetteville just inside the city limits of Goshen, which has a listed population of a tad more than 1,000.
The housing collapse and subsequent recession were body blows to housing developments, and Waterford Estates wasn’t immune. Hissom’s death and Combs’ legal fight against the Bank of the Ozarks in 2009 cast a pall over Waterford, which kept a look of a few houses and a lot of empty land.
Waterford was planned as a gated community, replete with fishing ponds, a 6,200-SF clubhouse and swimming pool and acres upon acres of luxurious upscale homes. These days, behind the front wall emblazoned with its name, Waterford Estates looks sparsely populated, an island of homes amid the pastures of eastern Washington County.
Riggins, the owner of Riggins Construction, said that impression is inaccurate. He said houses built in Waterford are selling well.
“Waterford Estates is probably the hottest subdivision in east Fayetteville,” Riggins said. “If you want to be in east Fayetteville, it’s the place to go. It’s very strong.”
There are signs of life and hope. On a rainy Sunday afternoon, two boys try their luck on one of the subdivision’s stocked ponds, and further down Waterford Drive there are a few houses under construction and “Open House” placards for several more.
Seventy-one lots were sold and developed before a nasty split between Bank of the Ozarks and Combs, who has also died, resulted in the bank taking possession of the remaining 110 lots. The bank sold those lots to Waterford Estates LLC of Dallas this past June for $2.58 million, an average of about $23,500 per lot.
Riggins and another company, Buffington Homes, purchased some of those lots from Waterford Estates LLC, and 26 are listed on the Washington County assessor’s website. Riggins paid between $42,000 and $50,000 each for 15 lots, with the exception of one $72,000 lot that is on the White River. Buffington Homes paid a similar price for its lots, with those on the river commanding $57,000.
The original 71 lots sold for $3.5 million, an average of $49,000, more than twice what the bank got. A quick search of real estate listings reveals Waterford Estates homes listed at between $300,000 and $450,000.
Riggins said he got involved in Waterford Estates in 2010, and he had the same misgivings many others had about the subdivision: It was too remote, too expensive and too far from Fayetteville.
Those concerns have fallen away.
“It took a while for people to get over the hump,” Riggins said. “There was never a demand for Waterford until after the crash. It was dead until about a year and half ago.”
The recovery of the housing market has helped, along with the improvement of the economy. Riggins said Waterford Estates had been envisioned as a community of fabulous homes approaching $1 million in price, but the development has found its niche now in the $300,000 to $500,000 range.
Steve Clark, the CEO and president of the Fayetteville Chamber of Commerce, said his city is unique in that its growth was predominantly east, a fact that led to the creation of subdivisions along Highway 45. The other major cities on the Interstate 540 corridor have seen their upscale development to the west, although Fayetteville has seen western expansion lately as well.
Fayetteville, though, started east toward smaller cities such as Elkins and Goshen. In those heady days, Clark said, Goshen made plans to develop more than 4,400 lots, about four times the population of the city.
“Everybody thought Goshen would become part of the city limits,” Clark said. “People were moving out on 45. There was more land, and they made a bet.
“As we moved into the 2000s, it still looked like a smart bet. Everybody thought it would never end, but it never never ends, and it ended quickly.”
Just as Riggins believes in Waterford Estates, David Harris believes in Otter Creek. Harris, a longtime builder of upscale homes in northwest Arkansas, said lots in the Cave Springs development southwest of Rogers once went for more than $70,000 before the housing crash and recession knocked real estate prices for a loop.
Prices for those lots, Harris said, are now in the $40,000 to $50,000 range. Harris said an easy if not completely scientific way to determine the expected price of a house is to multiply the lot price by six to seven. A house built on a $70,000 lot is in the neighborhood of $450,000, so a drop in lot price to $40,000 means the house built on it drops to $240,000 to $280,000.
“It’s going to take a while to recover,” Harris said.
Builders said there were some hard lessons learned when the hammer fell. Clark likes to joke that during those manic times when making money seemed so easy, anyone with a hammer called himself a builder and anyone with a briefcase called himself a developer.
“People were developing every piece of land, and everything was selling,” said Jack Hales, a builder and owner of a building supply company. “I can’t count how many developers there were in 2005. Most of them are out of business.”
Clark thinks Fayetteville’s expansion will reach Elkins before it gets to Goshen. But northwest Arkansas is growing at a rate of 23 people a day, Clark said, and all those folks have to live somewhere, so places seemingly islands such as Waterford Estates can still play a vibrant role in the area’s expansion.
Across the Board
The housing recovery has started and is gaining strength in all price ranges, homebuilders across northwest Arkansas said. The recovery isn’t approaching the manic heyday of the early 2000s, but that’s not necessarily bad or unexpected.
The most cautious recovery in the home sector is among the upscale builders. True, millionaires with no money worries are always going to find willing homebuilders, but builders on the level below those million-dollar estates are calculating risk more closely.
Harris said his business is good. The builder said he used to build 25 houses a year that averaged about $400,000 but has streamlined to building fewer, but more expensive, houses in upper-income areas like Shadow Valley and Pinnacle.
The demand for upscale homes is returning, Harris said. He said one factor in new home construction is the lack of suitable houses already on the market.
Someone who wants to buy a modern $500,000 home might find those in the price range are dated stylewise because of fashion changes in the past few years.
Rather than buy one on the market and spend thousands on a remodel, a customer might find it easier to custom-build a new one, Harris said.
“With the national economy doing better and the local economy doing better, people figured out the world was not coming to an end,” Harris said. “There was some pent-up demand.”
Lance Johnson said his construction company expects to build about eight homes this year in the $350,000 to $750,000 range. He calls the current market the best he has seen in six years.
“We’re not building anywhere near the houses we built 10 years ago,” Johnson said. “For a three-year period, we sold two or three $550,000 houses a month. I knew it couldn’t go on forever.”
Johnson said when he builds the upscale home now, it’s almost totally a custom job based on money in hand. He said if he pre-sells two homes he might then build a third speculatively — that is, build it and hope someone comes to buy it — but spec houses are no longer the norm. “In west Benton County, you see large houses being built,” Johnson said. “They’re under contract before they start.”
Johnson said builders were hurt because the housing market didn’t slow down over time; instead it screeched to a halt like someone pulled a parachute brake. Those who didn’t plan ahead for a slowdown or have reserves to survive through the downtime were in for major whiplash.
Riggins, who has been in the business for 23 years, said he builds about 300 houses a year and they are priced as low as $150,000 and as high as $800,000. During the crash, Riggins said, he built about half that number.
Johnson said he had money in the bank and was able to survive the crash. He has two full-time employees now, compared with 14 a decade ago.
“That’s what causes five years of heartburn,” Johnson said. “I don’t want to ever live that again.”