Northwest Arkansas continues its economic recovery at a healthy clip and faster pace than the U.S. as a whole, thanks to big improvements in the local housing and job markets.
Home builders across Benton and Washington counties were busier with 67% more new homes starts in May, compared to a year ago. Single-family home construction increased 3.2% in May on a national scale, according to the National Association Home Builders.
The cities of Fayetteville, Springdale, Siloam Springs, Rogers and Bentonville issued 132 permits in May for new residential dwellings. That compared to 79 permits by the same cities in the year-ago period. The cumulative value of the May permits rose to $36.485 million, up from $18.26 million in the same month of 2011.
More than 60% of the new homes under construction are located in Benton County. Bentonville issued 39 permits worth $9.616 million in May. That was up 15.4% from $8.330 million a year ago, according to city records.
Rogers and Siloam Springs also posted big gains with permits values rising 194% and 154%, respectively. There were 36 new homes started in Rogers that were valued by the city at $6.564 million last month. Siloam Springs issued 11 new permits for homes valued at $821,000.
Fayetteville and Springdale were also more active in May. There were 36 new home permits valued at $7.166 million by the city of Fayetteville. This market improved 36% from a year ago. Springdale issued 13 permits worth $12.318 million, versus 9 homes valued at $2.144 million in May of last year.
City planners report positive vibes from the builders and developers they have been meeting with in recent weeks.
Earlier this month the NAHB/Wells Fargo builder sentiment index rose to its highest reading since May 2007. David Crowe, chief economist for NAHB, said recent data supports steady growth in the housing sector, regardless of some weakening in other parts of the economy.
“Particularly encouraging are the gains in permit issuance posted in the single-family sectors in May, which are indicative of builders’ intentions to start new projects in the coming month,.” Crowe said.
The local metropolitan statistical area is also among 80 markets in the U.S. showing measurable and sustainable improvement as of May. The NABH/First American Improving Market Index released June 13, measures improvements seen in housing permits, employment and housing prices.
The index identifies metropolitan areas that have shown improvement from their respective troughs for at least six consecutive months. The local metro area was one of 28 new additions to the list in May, which was trimmed from 100 metro markets in April, down to 80.
The overall economic recovery is closely linked to how fast the housing sector regains its strength, according to Michael Harvey, economist and chief operating officer of the Northwest Arkansas Council. Harvey said historically housing has represented about 17 to 18% of the economy, which at almost one-fifth, is substantial.
Kathy Deck, director for the Center for Business and Economic Research, agrees that housing and employment together are intimately connected to economic growth and prosperity.
The Improving Market Index shows the local area reached a trough — or low — in building permits in April 2009. According to the index, home prices hit their lows in March 2011 and the job trough bottomed out in September 2009. All three of the areas have shown consistent and sustainable improvements as noted in the index — jobs posted the biggest gains.
Deck said the latest jobs numbers posted by the Bureau of Labor Statistics Friday (June 15) show the U.S. had gains of 1.4% while Northwest Arkansas registered 2.8% growth. She said stronger jobs reports lead to more improved home sales and higher home prices over time.
Both are proving true in recent months. MountData.com reports home sales in the two-county area from January through May rose 15.45% from a year ago. Median home prices rose 15.68% to $135,062 in the same year-over-year period.
Harvey said the shadow inventory of foreclosures that have not yet made their way to light could represent the biggest threat to the ongoing recovery in the housing market.
While home building has been relatively robust, the commercial market remains somewhat muted with the exception of an occasional large public project such as the new Fayettevlle High School. That project went through the city permit office in May valued in excess of $37 million.
The five cities together had a handful of commercial permits valued at $51.492 million, that compared to $27.894 million in the prior-year period.
(January through May)
2012: $107.092 million
2011: $72.019 million
2012: $77.575 million
2011: $61.404 million
2012: $36.376 million
2011: $15.793 million
2012: $30.845 million
2011: $40.89 million
2012: $1.273 million
2011: $23.891 million
(Permits are for new construction, additions and remodels are not included.)