Homebuilders across Northwest Arkansas were busy slinging hammers and making deals in the first three months of 2012.
The cities of Fayetteville, Springdale, Siloam Springs, Rogers and Bentonville together issued 283 permits for new homes between Jan. 1 and March 31 of this year. Those permits had a cumulative valuation of more than $63 million, up 21% from $52 million a year ago.
The warmer climate, great interest rates and low inventory levels were all the incentive local builders needed to jumpstart 2012.
Bentonville has been one of the hottest markets for new construction thanks to a vibrant local economy tied to the Walmart effect. The city has issued 102 new home permits in the first quarter with a valuation totaling $26.93 million. The building activity rose 31% from a year ago.
Tim McGuire, owner of Cornerstone Construction in Bentonville, has been very busy this year building roughly 50% higher-end custom homes and 50% spec homes in the $200,000 range. McGuire is working in four subdivisions within the Bentonville city limit.
He said the homes are selling quickly and it’s the first time he hasn’t had a model home in several years.
“The Bentonville market has been steady thanks to Walmart and the return of the apparel division and expanding IT departments,” McGuire said.
He doesn’t think the pace is sustainable, but more like a tide he hopes to ride for the next few months.
Unlike some builders, McGuire focuses on the niche he knows best — custom and semi-custom homes in Bentonville. He said the lot selection is getting tight inside the city limits because there has been no new development for the past five years.
“I suspect lots inside the city limits of Bentonville will be totally absorbed in the next 12 months or so,” McGuire said.
Linda Marquess, broker with Crye-Leike Realty in Fayetteville, said she couldn’t be any busier and still have her sanity.
She brokers and sells new homes build by Mark Marquess who has work going in five subdivisions across the region.
Friday morning (April 20) she was setting up a new model home in Fayetteville’s Cobblestone Crossing — her third in several weeks because once the home is furnished, Marquess said someone comes along and wants to buy it.
“I have 29 pending sales right now for new homes in Cobblestone, Sunbridge Village and Crystal Springs in Fayetteville and then up in Rogers in Spring Creek and River Walk in Bentonville we also have contracts pending for new construction,” she said.
Many of the new homes Marquess has under contract range from the $134,000 price range in Sunbridge Village to $189,000 in Bentonville’s River Walk subdivision.
“The one thing buyers are looking for regardless of the price point is quality. They want no maintenance exterior brick construction with fireplaces, whirlpool tubs, tile and wood floors with granite countertops. New construction has all of that and you don’t have to worry about what might have gone on inside the property in years past. If you can mix meth in a soda pop bottle while you're driving down the road, there’s no telling what could be done inside a home. I am just saying people who buy new don’t have those worries,” she said.
For new construction, Fayetteville has been one of the more sluggish markets to start 2012 with 54 new residential permits issued in the first quarter. The value of those permits totaled $11.81 million, down from $12.34 million a year ago.
In addition to Marquess, Rausch Coleman has also stayed active in west Fayetteville’s Walnut Crossing building smaller footprint homes with near zero-lot lines. Rausch Coleman more recently started construction in The Coves at Walnut Crossing with home prices starting at $150,000.
Jeff Whorton is working with Legacy National Bank to establish Springdale’s newest residential community — Grand Valley, located at Don Tyson Parkway and Butterfield Coach Road.
Priced at $149,900, Whorton has completed eight homes in the subdivision, with eight more underway. These homes have larger lots and feature higher ceilings, fireplaces and all the amenities buyers typically want.
Don Gibson, CEO of Legacy National Bank, said Thursday the first house in the subdivision has been sold and another is under contract.
“We want to keep building out this neighborhood so we need more buyers coming forward,” Gibson said.
Springdale has seen a 5.37% uptick in residential building this year issuing 46 new permits valued at $10.81 million.
Rogers issued 64 permits for new homes in the first quarter, these properties had a combined valuation of $ 13.4 million, up 45.8% from the prior year.
Siloam Springs issued 4 permits for new homes in the quarter — all of those came in March. Valued at $451,000, the new home market is down slightly from a year ago when the city issued permits valued at $586,000.
Economists say the uptick in homebuilding is good for the economy on the whole, trickling down to higher freight volumes reported by the trucking industry and improving sales recently posted by big box retailer Home Depot.
Builder confidence in the market for newly built, single-family homes slipped back a couple of notches in April to where it was in January, which was the highest level since 2007, according to the National Association of Home Builders.
“What we’re seeing is essentially a pause in what had been a fairly rapid build-up in builder confidence that started last September,” said NAHB Chief Economist David Crowe. “This is partly because interest expressed by buyers in the past few months has yet to translate into expected sales activity, but is also reflective of the ongoing challenges that are slowing the housing recovery – particularly tight credit conditions for builders and buyers, competition from foreclosures and problems with obtaining accurate appraisals.”
Northwest Arkansas appears to be more positive than the nation as a whole.
Through the first full three months of 2012 local agents sold 1,228 homes, up 8.57% from the prior year and a whopping 23.6% increase from 2010. New homes comprised about 13% of those total sales and the new home inventory fell to a three-year low, according to MountData.com.
Potential headwinds to the local market include any hitch in credit availability should the debt crisis in Europe worsen, and rising fuel costs which impact building materials and disposable income of consumers.
The respective cities issued commercial permits totaling $40.92 million in the first three months of this year. Commercial permits include industrial, churches, schools, businesses and multifamily properties.
The commercial building pace is fairly stable to the year-ago period when permits totaled $38.94 million among the same five cities.
There is no real impetus for commercial building to pick up steam as most of the projects on tap relate to end-use properties by existing businesses. The largest project in the quarter was the $28.315 million multifamily project in south Fayetteville.
North Carolina-based Campus Crest is building a 232-unit project which is a joint venture with a student housing operator at the University of Arkansas. The multi-million complex is slated for completion by the start of the fall semester, according to the company’s website.
A year ago the big ticket item among the five cities was the Siloam Springs Memorial hospital with a permit valuation in excess of $22 million. The new hospital is slated to open to April 28.
The commercial construction sector forecast provided by the most recent Skyline Report indicates renewed growth in the vendor community through expansion of existing vendors and new vendors entering the market, leading to stronger demand for office space. At the end of 2011, there was a 19.5% vacancy rate in office space across the region.
The forecast also expects to see growth of the University of Arkansas student population as driving more demand for multifamily construction.
However, the lead researcher Kathy Deck said, “We want to caution builders against interpreting this as a signal to begin building without restraint. Already there have been thousands of new units with anticipated completions in the next couple of years,” Deck said. She is the director for the Center for Business and Economic Research at the University of Arkansas.
Bob Boehmler, executive vice president for Arvest Bank in Benton County, noted in the report that the commercial real estate market is showing slow, but steady signs of an economic rebound. But he also said the commercial market still has a ways to go to reach sustainable levels for the long term.
(January through March)
2012: $42.83 million
2011: $21.24 million
2012: $30.21 million
2011: $21.43 million
2012: $13.18 million
2011: $10.85 million
2012: $17.65 million
2011: $14.35 million
2011: $23.58 million