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story.lead_photo.caption A runner makes her way along Salem Road on Saturday past houses being built south of Wedington Drive in Fayetteville. Northwest Arkansas builders are unable to keep pace with demand for houses in the area, and are branching out into smaller communities in the region. - Photo by Andy Shupe

Northwest Arkansas is burning through its supply of lots for homes, according to the most recent Skyline Report from the University of Arkansas and Arvest Bank.

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The Skyline Report

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Houses sold at a robust pace in the first half of the year, with almost 4,400 changing hands in Benton and Washington counties, the report found. A bigger share of them are newly built, showing the region is increasing its supply as more people move to or are born here.

Building permits

Number of building permits issued in the first six months of 2016 and 2017

CITY 2016 2017

Bella Vista 39 84

Bentonville 263 248

Bethel Heights 0 5

Cave Springs 114 97

Centerton 194 183

Decatur 1 0

Elkins 11 25

Elm Springs 21 18

Farmington 12 12

Fayetteville 188 270

Gentry 1 11

Goshen 11 17

Gravette 11 24

Greenland 1 1

Johnson 4 9

Lincoln 0 2

Little Flock 8 8

Lowell 54 38

Pea Ridge 68 89

Prairie Grove 53 127

Rogers 216 144

Siloam Springs 67 38

Springdale 174 192

Tontitown 26 60

West Fork 5 6

TOTAL 1,542 1,708

Source: Skyline Report

Web watch

To find a summary of the Skyline Report’s highlights, go to nwadg.com.

The supply of lots to build homes on, in contrast, has shrunk. The report found about 30 months' worth of unfilled lots in subdivisions under development by the end of June, down 35 percent from the year before. Even factoring in lots with at least preliminary residential approval from city governments, the region's supply is the lowest since at least 2004, when the report began.

In other words, the new supply isn't keeping up with the new demand. That dynamic, in turn, ties into regional concerns such as homelessness, the supply of affordable housing and sprawl as Northwest Arkansas grows.

"There isn't space or empty land on which we can build new homes at various price points and sell them to people, especially in places they want to live," said Mervin Jebaraj, interim director of the university's Center for Business and Economic Research and the lead researcher for the report. "Unless we're more conscious about where we're making land available to build, this problem is going to get worse before it gets better."

Melissa Sims, whose real estate company, First Star Realty, lists homes in the Fayetteville area, said she sees a mix of people coming from outside Arkansas and local residents swapping one home for another. Her agency sold several new homes just south of Wedington Drive, listed at $300,000 for 2,000 square feet, about as quickly as they're built. Streets have been laid for another subdivision next to them.

"Everybody's having to concede some of their wish list," because of the relatively short supply of homes, "or we're ending up having to build them a home, and lots are harder and harder to find," Sims said. Many end up going out to Farmington, Prairie Grove or other smaller cities.

Those locations are farther from the bustling city cores holding amenities such as Crystal Bridges Museum of American Art or farmers markets or the Razorback Greenway. "They're OK with it, because it's more affordable," Sims said of her clients. "And honestly, there's nowhere else to go."

Builders are responding to the demand by seeking more residential building permits. The Skyline Report counted just more than 1,700 issued during the first half of 2017, up from 1,540 a year before.

About half the permits were in the four largest cities, down from 55 percent in the same time frame. Prairie Grove, Tontitown and Bella Vista all saw their permits more than double.

"We're a location I think folks enjoy living in," said Prairie Grove Mayor Sonny Hudson, pointing to the city's historic district and plans to handle water infrastructure. "We just try to take care of the city."

But even there, Hudson said he expected the lots zoned and ready for houses could run out by next year, requiring more developers to seek out land and get it zoned and approved by the city for residential development.

The solution is rezoning land nearer the cities' cores for housing of all types so more people can afford to live near the amenities they want, Jebaraj said. A chunk of central land has gone to large retailers and their expansive parking lots. But with online shopping and other cultural shifts, that space could be better used with mixed-use developments with housing and places to shop or work smaller than big box stores, he said.

More lots for homes or apartments could drive down the exceptionally high prices downtown living typically demands, Jebaraj added.

Advocates have long blamed the cost of housing for a growing homelessness problem in Northwest Arkansas, where median rent reached $750 in 2015, outpacing the growth in income over the previous year, according to U.S. Census estimates.

Several cities are trying to move in the direction Jebaraj called for and encourage mixed-use development, though nearby residents are often concerned about increased traffic and other issues. Fayetteville for years has made denser and diverse development a priority in its permitting process and is looking into rezoning parts of College Avenue.

Bentonville has greenlit some mixed-use projects near or in downtown, including the 45-acre Red Barn project that should bring more than 160 townhome and apartment units off Northwest A Street and the J3 Apartments project of 250 units near Southeast Third Street.

Brian Bahr, the city's interim community and economic development director, said infill developments such as these fit in with the city's goals.

"I think it's been more of a priority for the developers, because there's a demand for that," he added. But much of the land is zoned for low-density neighborhoods, and with how expensive downtown land is, a lot of it has to be rezoned to make mixed-use developments worthwhile.

"There's possibility, it's just pulling the land together to make it happen," Bahr said.

NW News on 09/11/2017

Print Headline: Report: Housing lots running short

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