Northwest Arkansas Real Estate Hitting the Skids
A record five-year run in home construction and real estate prices in Northwest Arkansas hit a wall starting in late August, according to the Morning News, and the slowdown was felt most among small businesses, banking and construction sectors of the local economy.
Kathy Deck, an economist with the University of Arkansas, said the downturn was consistent with a trend of declines the business of home builders - in 15 years, there has never been a bigger drop in the U.S.
Many economists and federal reports indicated that the end of the housing boom has taken a toll on the nation’s economy, reducing the economic growth to an annual rate of 2 percent - the slowest pace of the year.
Month after month news of declining home sales reported by the Arkansas Realtors Association was offset by optimism from builders and real estate agents.
That’s unit Bella Vista-based Betty’s Homes Inc. and its owners Robert and Betty Abercrombie, filed for Chapter 11 bankruptcy, owing $10 million to local creditors and putting eight area banks and dozens of small businesses into jeopardy.
Rumors of cash flow problems and a glut of inventory in upscale single-family dwellings should force banks to look closely at their mortgage loan portfolios.
“It just amazes me that with all the solid data available to bankers and builders related to supply and demand that banks are still willing to loan and builders are still building. It will hit a wall,” said John Dominick, finance professor at the University of Arkansas.
While Arkansas mortgage demand has been tepid, and the housing pipeline remains clogged with an oversupply of unoccupied homes, reports show the overall number of building permits dropped more than 60 percent in the year-over-year quarter.
A November Arkansas Realtors report showed 2006 to be the third best year on record for area home sales, but 14 percent lower than in 2005.
The decline in Arkansas home sales has been widespread, as the hard times in home building and dropping home mortgage demand took its toll on many small-business owners who service the real estate sector.
A slumping number of jobs and a marked increase of slow and non-payments from several area builders prompted cut-backs and layoffs among small employers, from mortgage lenders to the companies supplying the building materials.
The number of liens filed by area sub-contractors against builders surged more than 50 percent in recent months, according to the court filings in both Benton and Washington counties.