Building Pace Slows
Last updated Thursday, November 20, 2008 3:53 PM CST in Business
By Kim Souza
THE MORNING NEWS
SPRINGDALE -- Northwest Arkansas new building permit values fell 35 percent behind 2007 figures through October.
The construction sector this year has thus far recorded more than $380 million in new permit values in its largest cities -- Fayetteville, Springdale, Rogers, Bentonville and Siloam Springs. But while that sounds like a lot of lumber, brick and mortar, the building pace in the same cities posted permit values worth $587 million in the first 10 months of 2007. When compared with 2006, building permits through October are down 40.7 percent.
Surplus supplies in both housing and commercial space as well as tighter credit streams to fund new projects have plagued regional building. The downward trend has spanned more than two years and put tremendous pressure on those who work in the sector, according to Kathy Deck, director for the Center for Business and Economic Research at the University of Arkansas.
Builders and construction-related businesses have continued to close up shop as the demand for new projects has fallen. In October, five building-related businesses in Benton and Washington counties filed for bankruptcy, according to federal court records. Through three weeks in November another seven contractors and subcontractors have filed for bankruptcy protection.
Local financial counselors also report seeing more clients in building-related businesses who have lost jobs.
Nancy Bolin, a housing counselor at the Economic Opportunity Counsel in Springdale, said the calls are escalating among many who have fallen behind on mortgages because of job losses relating to the construction sector.
Winter months are typically slower for home builders, but with so few homes selling and banks keeping tight grips on lending for speculative projects, there is not enough work to go around, according to market insiders.
During the month of October, the cities showed steep declines in residential building activity, issuing just 59 new housing permits between them.
Fayetteville led the group with 26 new housing permits, ranging in value from $137,000 to $727,000, excluding land costs. Compared with a year ago, home building in Fayetteville is down 38 percent in the month of October.
"Fayetteville is the most mature real estate market in the region, with respect to constant job and population growth," Deck said.
Fayetteville never got as "overheated" as some of the surrounding markets in terms of excess supply. That is partly because land values in Fayetteville rose too quickly for many home builders to have adequate margins to build there, she added.
Consequently, Fayetteville's home prices have held their own. This compares with the region's 8 percent decline in median home prices this year, according to Paul Bynum with Mountdata.com.
In October, both Bentonville and Rogers issued about one-third of the new home permits when compared with a year ago. Bentonville's 13 home permits totaled $2.67 million, while Rogers reported 11 new home permit values worth $2.1 million last month.
Springdale's new residential permit values slid 66.9 percent from a year ago. The city issued eight permits totaling $1.59 million, compared to 21 permits worth $4.89 million a year ago.
Siloam Springs issued just one housing permit in October, compared with seven a year ago.
Commercial building in the region has also dipped by more than 30 percent from last year.
In the month of October only Rogers showed a gain, thanks to a $5.5 million WalMart Neighborhood Market under construction at 5000 Pauline Whitaker Parkway. Rogers issued five new commercial permits worth $5.99 million, up 73 percent from a year earlier.
Bentonville issued one commercial permit valued at $430,454 for a Boomerang Car Wash located at 1004 S. Walton Blvd. This was down 90 percent from five permits worth $4.4 million issued a year earlier.
Fayetteville issued six new commercial permits valued at $7.8 million, down 50 percent from a year ago. The October permits were for mixed-use space and office space.
New commercial construction in both Springdale and Siloam Springs stalled completely in the last two months, with no new permits issued since August.
Reader Comments (No comments posted.)
The following comments are provided by readers and are the sole responsibility of their authors. The Morning News does not review comments before their publication, nor do we guarantee their accuracy. By publishing a comment here you agree to abide by our comment policy. If you see a comment that violates our policy, please notify the web editor.
Not already registered?
