Report: Lot Supply Shrinking in Northwest Arkansas

In northwest Arkansas, the supply of available lots for residential construction is shrinking, and housing affordability could be a challenge in the near future, according to Arvest Bank's Skyline Report for the second half of 2017.

The supply of lots was 27.3 months, down 25 percent from the 36.5-month supply reported for the same period last year and down 54 percent from the 58.7-month supply reported for the same period three years ago.

At the same time, the average sale price of homes has been increasing, especially in Washington County. The average price there rose by 9 percent year-over-year. Benton County's average price rose by 3 percent.

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The average price in Washington and Benton counties has increased by 23 percent and 12 percent, respectively, from the second half of 2014. 

In addition, 1,497 newly constructed homes became occupied from July 1 to Dec. 31, down 4.9 percent year-over-year.

Building permits were also down by 13 percent, at 1,434 compared to 1,638 for the second half of 2016.

Permits in Benton County decreased by 23 percent year-over-year, to 804, while permits for Washington County increased by 6 percent, to 630. Washingon County permits were down 15 percent from the first half of 2017.

"The growing scarcity of lots for new home construction, especially in the most desirable areas near amenities, is becoming worrisome," Mervin Jebaraj, lead researcher for the Skyline Report, said in a news release. "Put simply, we need more available lots added to the pipeline, or we will begin to experience issues with higher home prices affecting housing affordability in the region."  

Jebaraj is the director of the Center for Business & Economic Research at the University of Arkansas' Sam M. Walton College of Business in Fayetteville. 

"As we enter the traditional home buying season, we are seeing strong interest from many customers to find the right house in the right area at the right price," Mark Ryan, executive vice president and loan manager at Arvest, said. "This report's focus on affordability, combined with recent rate increases in mortgage loans, will likely lead to strong home buying throughout the area ..."