Skyline Report: High interest rates hurt home sales in Northwest Arkansas
High interest rates have depressed home sales in Northwest Arkansas, where the number of apartment vacancies remains tight in the first half of 2023, according to new Skyline Reports. However, house prices and rents continued to rise.
Arvest Bank on Tuesday (Sept. 12) released its Skyline Reports for residential and multifamily real estate in Northwest Arkansas for the first half of 2023. The semi-annual reports were completed by the Center for Business and Economic Research (CBER) at the Sam M. Walton College of Business at the University of Arkansas .
According to reports, fewer homeowners in the area are moving because they know they will be trading mortgages with lower interest rates for those with higher rates. Home sales fell by 8.8% to 4,422 homes in the first half of the year from 4,848 homes in the same period last year. During the same period, the apartment vacancy rate fell to 2.2% from 2.3%, even as 16 new projects with a total of 1,661 apartments opened last year.
CBER economists wondered when the region would feel the effects of higher interest rates because while other areas of the country were affected, Northwest Arkansas was not, CBER Director Mervyn Jebaraj said.
“The Northwest Arkansas residential real estate market has been red-hot over the past decade, as steadily increasing demand for housing has created an almost permanent seller’s market, with the median price of homes purchased more than doubling in the past decade,” Jebaraj said. “Now interest rate increases have slowed the pace of price increases to single digits, and the number of home sales has declined as buyers and sellers worry about the impact of higher interest rates and still-high home prices.”
The median home price in Benton County rose 5.1% to $422,564 in the first half of 2023 compared to the second half of 2022. During the same period, the median home price in Washington County rose 4.3% to $392,306. Over the past five years, prices have risen 77.1% in Benton County and 67% in Washington County.
In the first half of this year, 1,707 newly built homes were sold, representing 38.6% of home sales, the highest percentage since the Skyline Report began. The previous record for sales of newly constructed homes was 32.6% in the first half of 2019. The percentage increased from 26.5% in the second half of 2021.
The period with the largest home sales since the start of the Skyline report was the second half of 2021, when a record 6,030 homes were sold. Compared to that period, home sales fell by 26.7% in the first half of 2023.
Reports also show that higher interest rates have contributed to an increase in home inventories. The number of listings in the MLS database rose 172% to 1,591 in the first half of 2023 from 584 in the second half of 2021. However, listings were down slightly from the second half of 2022, when 1,618 homes were listed in the MLS database.
The number of home building permits issued in Northwest Arkansas rose to 2,309 in the first half of 2023 from 2,117 in the second half of 2022 and was the highest since 2,892 in the first half of 2022. The average value of permits rose narrowly to $322,576. in the first half of 2023 from $322,344 in the second half of 2022.
“Although we are not as strong as in the recent past, we are still helping many clients purchase homes as new people move into the area and as growing families move in,” said Chris Thornton, executive vice president and loan manager at Arvest Bank. To bigger homes. Springdale. “We also continue to provide financing for multifamily complexes, which are an important part of the region’s overall housing mix.”
In the first half of this year, 136 multifamily building permits were issued for 20 residential complexes. The total value of multifamily building permits fell 21% to $263.11 million in the first half of 2023 from $333.18 million in the second half of 2022. The Plaza Apartments at Pinnacle had the highest value permit in Rogers at $63.26 million. The Retreat had the highest combined permit value in Fayetteville, with the two permit packages totaling $44.4 million. Lumen received the highest value permit in Bentonville at $42.22 million.
The apartment vacancy rate in Northwest Arkansas rose from 1.6% in the second half of 2022. But, as noted in a previous Skyline report, Jebaraj said the vacancy rate remains “functionally zero.”
He added: “Of the 972 new units that became rentable during the first half of the year, only 322 units were not rented by the end of the reporting period.” “And the average condo price continues to rise – increasing by double digits year over year to more than $950 per month.”
The average monthly rent in Northwest Arkansas rose 10.6% to $952.17 in the first half of 2023 from $860.97 in the same period last year. Rent rose 2.8% from $926.55 in the second half of 2022.