More building permits were issued in northwest Arkansas last year than have been issued any year since 2006, according to the latest Arvest Bank Skyline Report.
At the same time, the average price for homes continued to increase, and home affordability remains a concern, the report said.
Permits issued for new home construction increased by 7 percent compared to the same period from 2017, reaching 1,534, according to the report released Tuesday. Including the 1,804 permits issued in the first half of 2018, there were 3,338 building permits issued in the region for all of 2018.
Permits rose 42 percent in Fayetteville, 32 percent in Siloam Springs and 25 percent in Bentonville. But they fell 54 percent in Springdale and 4 percent in Rogers.
The average price for homes also rose year-over-year.
The average price of a home sold in Benton County increased by 7 percent to $244,478. In Washington County, it rose by 4 percent to $228,681.
Slightly fewer newly constructed homes became occupied during the period, falling from 1,488 in the second half of 2017 to 1,387 in the second half of 2018, a 7 percent decline.
So the number of complete but unoccupied homes more than doubled, to 524 from 238.
Single-Family Market Strong
Despite this, Mervin Jebaraj is not concerned, due to the high absorption rate of newly constructed homes recorded for the past several years. Jebaraj is director of the Center for Business & Economic Research at the Sam M. Walton College of Business at the University of Arkansas, which researches and writes the Skyline Report.
"We consider this increase to be a factor of timing more than shrinking demand for new homes or overbuilding," he said. "With regional unemployment remaining low and population growth continuing, I am confident that the new homes being built will continue to be bought. The market for single-family homes, both new and previously owned, remains strong.
"In short, homes are being built and bought at a rapid pace despite average prices increasing and interest rates being higher than they were a few years ago."
Using the absorption rate from the past 12 months implies that there was a 29.3-month supply of remaining lots in active subdivisions at the end of the second half of 2018, down slightly from the 29.5-month supply in the first half of the year, the report said.
"One of the main things we will be looking at as we move forward will be home affordability," Jebaraj said.
The region's "median multiple," a gauge of home affordability tied to incomes, has continued to increase. A healthy median multiple is 2.5, but it's 3.1 in Benton County and 3.9 in Washington County.
In addition, the number and value of multifamily building permits saw significant growth in the second half of 2018. There were 276 permits valued at $372.9 million — the most since the inception of the report — in the second half of 2018, compared to the 107 permits valued at $132.3 million recorded for the second half of 2017.
More residents of the region are moving into multifamily properties. While the total square feet of multifamily properties in county assessor databases has increased 11.3 percent year-over-year, the vacancy rate declined to 3.5 percent in the second half of 2018 from 4.5 percent in the second half of 2017.