Newer homes are making up a larger share of the residential sales across Arkansas, comprising roughly 56% of the deals recorded this year, according to a recent report from Irvine Calif.-based RealtyTrac.
In Northwest Arkansas, newer homes – those built since 1990 – comprised 90% of sales in Benton County and 72% of sales in Washington County this year, according to the report.
In the Fort Smith market, roughly 54% of sales this year have been for newer homes, while in Crawford County almost 62% of home sales were for properties built since 1990.
The aging home analysis report released last week found that homes built prior to 1990 did not sell as well as newer properties, bringing only 96% of the estimated market value gleaned by newer homes – those built since 1990. This can be problematic in areas where there is more competition from newer homes, such as Benton and Washington counties.
Areas were population continues to grow like in Northwest have seen a robust new building boomlet in the past two years and a major construction expansion over the past two decades which has created a larger share of newer homes in Benton and Washington counties.
Percentage of homes built since 1990
• U.S. – 30%
• Arkansas – 37%
• Benton County – 55%
• Washington County – 50%
• Sebastian County – 28%
• Crawford County – 41%
NEW HOME COMPETITION
Northwest Arkansas has a much larger newer home market than the state and nation as a whole. Experts said this puts pressure on the prices of homes built prior to 1990 given the high inventory levels of new homes in the market.
In Benton County, 91% of the sales this year have been for homes built since 1990. About one-third of the county’s homes were built since 2000 and homes in this age range have been the most popular among buyers this year, accounting for 67% of the property sales in 2013.
Brand new homes for sale in Benton County carried an average price per-square-foot of $106, compared to $80 for all other existing home sales as of Oct. 30, according to MountData.com
But the RealtyTrac report found that homes built since 2000 sold at 105% of the market value, and homes built in the 1990s brought roughly 99% of market value. The discount fell to 88% of market value for homes built in the 1970s.
Newer homes and older homes are quite balanced in Washington County in terms of the number of properties. But the sales of newer homes (built in 1990 or later) made up 72% of the residential real estate deals this year. Nearly half of all home sales in the county this year were for properties built since 2000, selling an 100% of market value. The price was discounted to 93% of market value for homes built in the 1970s.
The brand new home cost in the county is roughly $106 per square foot, compared to $84 a foot for all other existing homes sold this year, according to MountData.com
OLDER HOME VALUES
In Sebastian County, the mix between newer and older homes closely resembles that of the U.S. Roughly 77% of the homes in Sebastian County were built prior to 1990.
These older homes comprised 45% of the sales this year with virtually no discount for those built prior to 1980. Homes built in the 1970s were discounted to 92% of market value and homes built in 1960s discounted to 84% of market value, according to RealtyTrac. About 12% of the homes sold in Sebastian County this year were built since 2000, and that is less than the 30% of buyers who purchased homes built in 1990s and 1980s.
Roughly 21% of the sales this year in the county were for homes built in 1970s. In contrast, just 2.7% of sales in Benton County and 8.2% of sales in Washington County were for homes constructed in the 1970s. Agents said older homes that have been updated appeal to savvy buyers because of the value in the price and often the larger lots in mature neighborhoods.
Jake Adger, chief economist at RealtyTrac, said in areas where inventory is tighter, buyers looking for a bargain have an opportunity to maximize value if they can find an older home that suits their needs.
There is a program known as the Federal Housing Administration’s 203(k) that can help buyers take advantage of the better pricing on older homes and still get the updates they want. Owner-occupant buyers can use the 203(k) program to finance the purchase, rehab, and upgrade of an older home, while homeowners can also take advantage of the program to roll rehab costs into a refinance.
“Many consumers may not realize the FHA 203(k) program allows them to roll in the cost of both minor and major rehab into the purchase financing or a refinancing,” said Dennis Walsh, CEO of REBuildUSA. “This means the entire layout of these older homes can be changed to fit more with modern tastes and sensibilities. We find folks also adding rooms, knocking down walls and other changes that enlarge, modernize or open up a floor plan."
One major area, he said buyers can add value is expanding or updating a master bathroom, which is sometimes not present or too small in older homes.