Realtors in NWA adjusting to end of housing boom

Arkansas Business, July 9, 2007 by Mark Friedman

A COUPLE OF YEARS AGO, WHEN potential homebuyers wanted to look at a house in the $300,000 price range in northwest Arkansas, Stacy Walton would show them a half dozen on the market.

"And they'd say, 'OK, what else can we see?'" said Walton, who owns Northwest Arkansas Real Estate of Bentonville. "We'd say, 'Well, that's pretty much it.'"

As people flocked to Washington and Benton counties, homebuilders saw the demand and moved into overdrive. Now there are too many homes on the market.

Homes that were selling in 90 days just a year ago can now take six to nine months to sell.

From Jan. 1 through the end of May, the number of houses sold in Benton and Washington counties fell 9.6 percent from the same period in 2006, 2,855 to 3,157, according to the Arkansas Realtors Association in Little Rock. In Arkansas, the numbers were off 7.4 percent during the same time frame.

The northwest Arkansas real estate industry is feeling the slump. Seven northwest real estate companies reported lower sales in 2006 over 2005. In addition, they are dealing with increased competition from the top real estate agency in Arkansas moving into the area: Crye-Leike Realtors.

But the latest report by the Arkansas Realtors Association, released last week, contained a shred of good news:

Washington County reported home sales were up 2.4 percent in May--to 298--over the May 2006 figures.

"This is the first month in a while we've seen actually a gain in sales," said Ethan Nobles, director of media relations for the Arkansas Realtors Association. The increase "represents seven houses--not a whole lot, but it's a gain instead of a drop. That's encouraging.'"

In Benton County, the numbers weren't as encouraging. In May, home sales were off 14.4 percent, dropping from 493 in May 2006 to 422 in May 2007. Statewide, home sales were off 10.9 percent in May from May 2006.

Real estate agents are taking the housing slowdown and the increased competition in stride, said Greg Spencer, president of the Metro Area Board, which covers northwest Arkansas.

"The comment [from agents] is, 'Well, it's a lot slower than it has been, but there's business out there,'" Spencer said. "They may be working harder this year than they have in previous years to get business, but it's out there and they're getting it."

He said he hasn't seen any major changes in services that the real estate agencies offer in northwest Arkansas.

"I'm sure they're being much more cautious in their spending, and they're just watching the market very closely," Spencer said.

Some companies, though, are taking the opportunity to expand.

Walton, the owner of Northwest Arkansas Real Estate, recently bought a Prudential franchise and has changed his firm's name to Prudential Northwest Arkansas Real Estate in an attempt to capture out-of-state investors.

"We see more savvy buyers," Walton said. "And we're seeing buyers that aren't necessarily local ... and having the presence of a name like Prudential allows us to reach out to those buyers sooner."

Walton's firm reported residential sales volume of $84.3 million in 2006, its first full year of operation.

Better Days

Between 2004 and 2005, northwest Arkansas was the hot spot for home sales. In Benton County, home sales were up 19 percent, from 4,671 in 2004 to 5,557 in 2005. Statewide, homes sold increased 15.7 percent.

The value of the homes was rising, too. Between 2004 and 2005, the average price of homes in Washington County jumped nearly 15 percent from $162,700 to $187,000. The statewide average home price was $148,000 at the end of 2005, an increase of 8.7 percent.

But between 2005 and 2006, the average price of a home in Washington County barely moved. It was tip 0.8 percent to $188,500. Meanwhile, the statewide average had risen nearly 4 percent.

Benton County wasn't looking much better in 2006. The number of homes sold in the country dropped 12.6 percent between 2005 and 2006.

"What we've seen in the last couple of years is a very, very hot housing market," said Josh McGee, a research assistant at the Center for Business and Economic Research in the Sam M. Walton College of Business at the University of Arkansas. "Of courses, when you compare yourself to the best years, you're going to look like you're coming out a little slower."

When the housing market was hot, homebuilders were putting up houses as fast as they could, especially with the higher end homes.

"We're a little over-built, and houses aren't moving as quickly as they were before," McGee said. "We've got quite a few months of inventory in the pipeline.... This trend may continue for another six months to a year."

The good news is northwest Arkansas still has strong employment and population growth, he said.

"As long as the demand for houses continues to be strong, we see this as kind of working itself out," McGee said.

Agencies Respond

John Hutchinson, the owner of Hutchinson Reality Inc. of Bella Vista, saw his sales volume drop 7.73 percent from $47.7 million in 2005 to $44 million in 2006.

Hutchinson said he had a good June 2007, but wouldn't release sales figures for the month.