Rising NWA home prices could hurt competitive cost of living

Soaring home prices in NWA could impact the region's ability to compete with metros like Austin and Seattle on cost-of-living metrics.

• The warning comes from Mervin Jebaraj, director of the Center for Business and Economic Research (CBER) at the University of Arkansas, who oversees the semi-annual Skyline Report.

Driving the news: The average price of a home sold has increased more than 55% in Benton County and more than 54% in Washington County in the past five years, according to the single and multifamily residential Skyline Report out this week.

• The pace of new home construction in 2021 was higher than it's been since the heyday of 2006, according to the report.
• But it's not enough to meet demand and that's driving price increases. NWA grows by an estimated 30 people each day, Jeberaj says.

Why it matters: As prices and rents climb, it becomes harder for lower-wage earners to afford housing or build personal wealth through equity in their home.

What they're saying: Residential zoning codes in NWA communities are one factor preventing enough homes from being built, Jeberaj told Axios.

• Many of the codes were developed in the 1960s and 1970s, requiring large lot sizes and parking space that may not be as relevant today.

Yes, and: Jeberaj encourages each city to consider updating its zoning to allow denser neighborhoods as well as mixed single and multifamily neighborhoods so NWA doesn't end up pricing people out of affordable homes like San Francisco, Denver or Austin.

• But codes need to be changed sooner rather than later in order to provide more housing options that will keep prices and sprawl in check, he said, adding it may be easier to throw out current zoning and start from scratch.

By the numbers: Between July 1 and December 31, 2021 the average selling price for a home in Benton County was $345,517, up nearly 18% from a year earlier. In Washington County, the average selling price was $311,517, up nearly 16% from the previous year.

• 584 NWA houses were for sale on the Multiple Listing Service at the end of December, the lowest number since 2009.
• For the second half of 2021, the vacancy rate for NWA multifamily properties decreased to 3% compared to 5% a year earlier.
• The average monthly lease rate for a multifamily unit at the end of June was $789, up $21 from the first half of 2021.

Context: Arvest Bank sponsors the Skyline reports, which focus on residential and commercial real estate in Benton and Washington counties. CBER conducts the research.

What to watch: The commercial real estate Skyline Report, which gives a breakdown of retail, office and warehouse space in NWA, is due out in about three weeks.