The scorching housing market puts a smile on the face of many of us, but it’s not all good news
A story in Wednesday’s newspaper tells us something that anyone who owns or wants to buy a home in Northwest Arkansas already knows. House prices are rising. Strongly.
The average price of a home in Benton and Washington counties increased 16.2% in the first six months of 2021. The average price today? A cool $ 306,000 and some change. Just five years ago, the average price in the two counties was only $ 212,323. That’s it according to The Skyline Report, a quarterly real estate market review produced by Arvest Bank and reviewed by businessmen, real estate agents and government officials.
For someone who already owns a home, this is almost all good news. For those who still owe a mortgage, the higher value creates equity without hitting a hammer or writing an extra check. For those who own their free and clean home, this increases the value of the investment. Every few years the taxman will ask for a little more money due to the higher valuation and your insurance may increase, but these are the only downsides.
Factors behind these higher prices, the Skyline authors tell us, include extremely low lending rates, rapid population growth, and some of the lowest inventory levels they have ever reported. We don’t remember much about those college economics courses, but we do remember that high demand coupled with low supply equals higher prices.
So, for some of us, the Skyline Report has produced a wave of satisfaction and comfort in these troubled times.
But let’s not pretend it’s good news for everyone. The same report indicates that the vacancy rate for rental residences has fallen to 3%, one of the lowest on record. Remember that supply and demand equation? The same principle drives up rents for those who can least afford it. As our newspaper reported a few months ago, rising rents and house prices are pushing low-income people away from urban centers in both counties and thus increasing their transportation costs to work, shopping, play. , etc. combination for the adjusted cost of living, leaving less money for other necessities.
Another factor behind the housing shortage, the Skyliners tell us, is the speed at which new homes are being built. Anyone who drives in the major communities of Northwest Arkansas will probably scratch their head on this. It seems like you can’t turn around without seeing an apartment complex, condo development, or subdivision under construction.
But the new supply has not kept up with growing demand – more than 30 people a day move through the region, experts tell us, even during a global pandemic. Add to that the supply chain issues (also thanks to production slowdowns linked to covid-19) which make building materials both harder to obtain and more expensive. Without materials, builders delay the start of new projects, which then has the negative effect of restricting construction jobs. Fewer jobs means fewer people are able to buy houses or pay higher rents, so they have to move further, which increases their transportation costs … well you get the idea .
Economies are complicated creatures, and just because the news says many of us are winners in this hot housing market, doesn’t mean there aren’t losers.
Mervin Jebaraj of the Center for Business and Economic Research at Walton College at the University of Arkansas said the situation raises long-term concerns about affordable housing in the area. He suggests that local cities consider major changes to their building, town planning and zoning codes to address this. This is a big demand for communities struggling not only with the housing shortage, but also an ongoing pandemic. But it is still necessary.
The area takes great pride in the fact that it is frequently mentioned on various lists of the best places to live, raise a family, retire or cycle. Without some changes in the way the region develops housing, Northwest Arkansas could start to fall on these lists, rather than move forward. Under these circumstances, there will not be so many winners.
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WHAT’S THE POINT: Recent news about Northwest Arkansas’s booming housing market is good news for most of us, but not all.