Builders: Lot prices dropping, "cleansing" ahead

[KJW]

This should get interesting as there are still homes popping up all over the place:

http://www.nwaonline.com/articles/2006/05/...01cleansing.txt

[slyder1]

I wouldn't be too worried about this. Basically what needs to happen is the builders just need to slow down for a period until all these vacant homes are sold and then get back on the waggon. There are still alot of developments going on and many more are planned or just getting off the ground.

[masons_dad1]

This should get interesting as there are still homes popping up all over the place:

http://www.nwaonline.com/articles/2006/05/...01cleansing.txt

That's what I've been saying all along. This isn't the first news article saying property values are going to drop or already dropping and the people buying all these big fancy homes now are going to only break even if they're lucky when they decide to sell. I say keep up the good work home builders because when it's time for me to buy I'm going to get a steal.

[slyder1]

That's what I've been saying all along. This isn't the first news article saying property values are going to drop or already dropping and the people buying all these big fancy homes now are going to only break even if they're lucky when they decide to sell. I say keep up the good work home builders because when it's time for me to buy I'm going to get a steal.

^That pretty much sums it up. If they have mainly been building upscale homes like I've been hearing, that means all those fancy homes will drive the median price of the homes in NWA way up. Once they start to build the smaller more affordable homes that will drive the inflation down and these "upscale" homes will be worth less than before. It was only a matter of time before this happened(s).

[Aporkalypse]

I very much doubt NWA will have much of a price drop, if any. "Bubble" conditions elsewhere are certainly going to occur in areas that are grossly overbuilt and where prices have skyrocketed and become unaffordable. Compared to the rest of the U.S., NWA is still a steal. While people up there like to talk about how prices have gone up, they really haven't much compared to the "bubble" areas of California, Florida, and the Northeast. Many of these areas saw prices double in 2 years. Unless population growth slows substantially, which I haven't seen signs of, demand will still be there in NWA. If growth ever hits the brakes up there, I'm sure developers will get caught with excess inventory.

Now, prices may flatten out for a couple of year. I still think NWA will continue to be a profitable real estate market. Along the same lines, DFW and Houston's affordability (along with LR) is causing prices in the areas to actually HEAT UP as the bubble bursts elsewhere. Let's just thank God we live in a part of the country where you don't have to pay $600k for a run-down 1500 SF ranch house.

[Mith242]

I very much doubt NWA will have much of a price drop, if any. "Bubble" conditions elsewhere are certainly going to occur in areas that are grossly overbuilt and where prices have skyrocketed and become unaffordable. Compared to the rest of the U.S., NWA is still a steal. While people up there like to talk about how prices have gone up, they really haven't much compared to the "bubble" areas of California, Florida, and the Northeast. Many of these areas saw prices double in 2 years. Unless population growth slows substantially, which I haven't seen signs of, demand will still be there in NWA. If growth ever hits the brakes up there, I'm sure developers will get caught with excess inventory.

Now, prices may flatten out for a couple of year. I still think NWA will continue to be a profitable real estate market. Along the same lines, DFW and Houston's affordability (along with LR) is causing prices in the areas to actually HEAT UP as the bubble bursts elsewhere. Let's just thank God we live in a part of the country where you don't have to pay $600k for a run-down 1500 SF ranch house.

Yeah, I know some Californians that have moved here and they've basically said a lot of the same things. Things are so expensive out there this area is still pretty cheap to them.

[masons_dad1]

Yeah, I know some Californians that have moved here and they've basically said a lot of the same things. Things are so expensive out there this area is still pretty cheap to them.

Yeah it only makes sense that a house in California would cost more than a house in Arkansas... I mean this is Arkansas not California. What the media is talking about is the exaggerated house prices here that are now becoming harder to justify now that property values are starting to come down. The good news is that we may start seeing more and more lower priced homes being built as the property values come down.

[Aporkalypse]

Yeah it only makes sense that a house in California would cost more than a house in Arkansas... I mean this is Arkansas not California. What the media is talking about is the exaggerated house prices here that are now becoming harder to justify now that property values are starting to come down. The good news is that we may start seeing more and more lower priced homes being built as the property values come down.

I guess the question is whether NWA will become part of the phenomenon that Texas, Little Rock, and Memphis are experiencing - prices in these areas are rising as real estate investors backing out of the "bubble" markets are looking for bargains in high-growth areas elsewhere. Arkansas and Texas certainly are bargains.

[masons_dad1]

I guess the question is whether NWA will become part of the phenomenon that Texas, Little Rock, and Memphis are experiencing - prices in these areas are rising as real estate investors backing out of the "bubble" markets are looking for bargains in high-growth areas elsewhere. Arkansas and Texas certainly are bargains.

NWA already has one of the highest costs of living in small metros so if house prices keep going up NWA is going to also rank "Worst Place To Raise A Family" when both parents are forced to work just to get by. No point in having recreational amenities since people will be working 2 or 3 jobs so there won't be time for recreation. Education will suffer because kids will have to drop out and go to work to help with bills. But then I guess NWA could be "Best Place To Raise A Family If You're Rich".

[jdevers]

NWA already has one of the highest costs of living in small metros so if house prices keep going up NWA is going to also rank "Worst Place To Raise A Family" when both parents are forced to work just to get by. .

Are you serious? How did you come to this conclusion? Sure there are some expensive houses here, but go to ANY thriving metro and there will be expensive houses. You show me a metro without any new expensive homes and I promise you it is an area on the downslide. NWA still has a very low cost of living, even compared to most small metros. On the Forbes list everyone was talking about yesterday, we were rated as 35th lowest cost of living. We can't compare our cost of living to MSAs with 80,000 people, as a city gets larger it gets more expensive to live there, that's pretty much a fact of life if all other things are equal. I moved here from Russellville AR about 5 years ago, I KNOW that I could find a house there cheaper than the one I have here or I could buy a lot more house for the same money, but I also know that I make about 12K more a year here than I did there. Also, while I work in the medical field and there is quite a bit of demand there, I have MORE job security here than there.

You've said before that you don't know anyone making more than 40K a year (the number may be different, but the fact remains...), pretty much everyone I KNOW makes almost that and I know quite a few people who make a heck of a lot more (and I'm not just talking about doctors at work, I mean nurses and friends from other fields). My wife was working as a receptionist in Russellville making $7/hr and that was pretty good money compared to other similiar jobs in town, when we moved here she was hired on at $9/hr and has quickly climbed the ladder to be in administration and makes ~$35K a year. They also don't treat her like crap because they know how hard it is to replace her, versus Russellville where any ad in the paper would bring in at least a few qualified applicants. All that in less than 5 years and she doesn't have any post-HS education. One of my friends works at Lowe's in Fayetteville and he makes $9.15 an hour, the same job in Russellville pays minimum wage plus a few cents per quarter of experience. I know, I did it while going to college. That same Lowe's pays $8.50 an hour to cashiers with NO experience at all. While our mortgage is higher than it would be in Russellville, everything else is about the same. Insurance, car insurance, car payment, gas prices, grocery and commodity expenses, meal prices, etc are all about the same here as they are there. So while I pay an extra $200 a month for a house, together we pull in more than double what we were making in Russellville and we weren't doing to bad there. I'm not even going to begin comparing the area to the other side of the state. Sure the Delta is cheap, but you better hope you have money going in because you won't be able to work there outside of about 5 fields (one of which is working IN the fields...).

On an entirely separate note, you should take a trip to other cities and see that NWA mall is pretty much the same as every other mall. ALL malls took a turn for the fashion clothing scene in the last ten years, as a matter of fact, they all pretty much have the SAME stores plus or minus a few. As stores such as Best Buy, CompUSA, Furniture Row, etc were becoming really popular, the equivalent fled the malls of the country. I know the World of Science store was doing really good here and that it was the parent company that had issues, but that really proves the point. We were an anomaly, that same type of store wasn't doing so hot nation wide because it DEPENDED on a mall to work and the malls themselves were changing.

[nj829]

The biggest issue I noticed when I was relocating in terms of housing is that you can find a house anywhere for $150,000 or more available. Try to find something in the $130,000 or under range though, and you will long and hard to find something decent. My neighborhood is a brand new development, with housing that I got at $113,000, and those around be are selling now at $120+, and they can't build them fast enough. The builders went for immediate gratification with big houses and revenue, and now the one or 2 that are smart enough to do entry level to mid level are going to sustain their profitibility and continue to succeed while the big house builders sit on inventory. I'm already planning on the trade up once the large ones that were built down the road from me have to drop a huge amount in price before the bugs take over, since they haven't sold for the past year they have been built, and don't appear to be selling for the next year either.

[masons_dad1]

On the Forbes list everyone was talking about yesterday, we were rated as 35th lowest cost of living.

Can you post the link to that Forbes list because the official Forbes website only has Fayetteville listed on the 2004 list and ranked at 144 for cost of living.

[Mith242]

I think this lists what people have been talking about.

http://www.forbes.com/lists/2006/1/2920.html

Or I can try pasting the info if anyone doesn't feel like checking the link out. I like posting as most info actually on here as possible.

#9 Fayetteville AR

Population: 399,700

RANK

Colleges1 169

Cost of Doing Business2 23

Cost Of Living3 35

Crime Rate4 36

Culture & Leisure5 196

Educational Attainment6 141

Income Growth* 11

Job Growth* 7

Net Migration* 15

Overall 9

Fayetteville AR

[Mith242]

Well home sales might be slowing down but it looks like apartments occupancy rates are at record highs here in Fayetteville. Which of course is going to mean even more apartments going up all over.

[Aporkalypse]

NWA already has one of the highest costs of living in small metros so if house prices keep going up NWA is going to also rank "Worst Place To Raise A Family" when both parents are forced to work just to get by. No point in having recreational amenities since people will be working 2 or 3 jobs so there won't be time for recreation. Education will suffer because kids will have to drop out and go to work to help with bills. But then I guess NWA could be "Best Place To Raise A Family If You're Rich".

That's simply incorrect.

Look at this list:

http://money.cnn.com/pf/features/lists/re_...6/bymedian.html

The figure for the Fayetteville-Springdale-Rogers metro was 122,916 for the same quarter which puts it well below the national median of $213,900.

It does not have "one of the highest costs of living in small metros". It's closer to the opposite.

If you'll scroll down that list you'll see quite the opposite. Affordable housing is a huge issue in the Sarasota-Bradenton, Ft Myers-Cape Coral, and Naples-Marco Island metros where housing prices have doubled over the last 5 years.

Here is a list of smaller metros where costs are above $200k. I tried to leave out the NJ suburbs of New York and Long Island/upstate suburbs.

Bridgeport, CT $468,500

Sarasota, FL $374,900

Boulder, CO $349.500

Ft Myers, FL $283,100

Worcester, MA $289,500

Tucson, AZ $245,200

Allentown, PA $243,400

Madison, WI $224,600

Hagerstown, MD/WV$221,700

Melbourne, FL $209,500

CO Springs, CO $209,000

Eugene, OR $209,000

Daytona $209,000

---------------------------------------

NWA $122.916

Again, just be happy you live in part of the country where you can find a home. Try www.realtor.com and compare Bentonville and Rogers housing to some of these places.

[masons_dad1]

I think this lists what people have been talking about.

http://www.forbes.com/lists/2006/1/2920.html

Or I can try pasting the info if anyone doesn't feel like checking the link out. I like posting as most info actually on here as possible.

#9 Fayetteville AR

Population: 399,700

RANK

Colleges 169

Cost of Doing Business 23

Cost Of Living 35

Crime Rate 36

Culture & Leisure 196

Educational Attainment 141

Income Growth 11

Job Growth 7

Net Migration 15

Overall 9

Fayetteville AR

The problem with those stats is they put Fayetteville into the wrong list. It should be in the small metro list.

2004 BEST SMALL PLACES RANKINGS

#5 Fayetteville, AR

Population: 332,000

Advanced Degrees: 40

Cost of Doing Business: 35

Cost Of Living: 144

Crime Rate: 34

Culture & Leisure: 88

Educational Attainment: 69

Income Growth: 1

Job Growth: 1

Net Migration: 7

Overall: 5

The Fayetteville metro isn't the most expensive metro to live in, but it is still one of the most expensive "small metros" according to the Forbes lists. Obviously they changed the 2005 lists by putting Fayetteville in with the big metros which, of course, makes it look much better than when compared to equally sized metros. The huge difference in the Culture & Leisure is quite obvious since Fayetteville has nothing even close to what the big metros have in that category.

[masons_dad1]

That's simply incorrect.

Look at this list:

http://money.cnn.com/pf/features/lists/re_...6/bymedian.html

The figure for the Fayetteville-Springdale-Rogers metro was 122,916 for the same quarter which puts it well below the national median of $213,900.

It does not have "one of the highest costs of living in small metros". It's closer to the opposite.

If you'll scroll down that list you'll see quite the opposite. Affordable housing is a huge issue in the Sarasota-Bradenton, Ft Myers-Cape Coral, and Naples-Marco Island metros where housing prices have doubled over the last 5 years.

Here is a list of smaller metros where costs are above $200k. I tried to leave out the NJ suburbs of New York and Long Island/upstate suburbs.

Bridgeport, CT $468,500

Sarasota, FL $374,900

Boulder, CO $349.500

Ft Myers, FL $283,100

Worcester, MA $289,500

Tucson, AZ $245,200

Allentown, PA $243,400

Madison, WI $224,600

Hagerstown, MD/WV$221,700

Melbourne, FL $209,500

CO Springs, CO $209,000

Eugene, OR $209,000

Daytona $209,000

---------------------------------------

NWA $122.916

Again, just be happy you live in part of the country where you can find a home. Try www.realtor.com and compare Bentonville and Rogers housing to some of these places.

Have you ever been to Sarasota-Bradenton, Ft Myers-Cape Coral, and Naples-Marco Island? They are like Beverly Hills compared to the Fayetteville metro. Of course housing is more expensive in those places because they cater to the very wealthy. Fayetteville has no excuse for not having adequate affordable housing. I've been looking at all the realtors websites and haven't found a decent starter home under $100,000 and those I did find are nothing but trailers. It's going to take a lot of work for people making modest incomes to find a decent starter home in Northwest Arkansas. I only know of one person who bought a brand new custom home in Bentonville for under $100,000 so I do have hope that someday I may own a home here. Housing cost is only really just a part of cost of living. There's also utilities, groceries, fuel prices and taxes to consider, which the Fayetteville metro is definitely far from the most affordable metro in those areas. Like I said you get what you pay for and when all the hype about NWA wears off and things get back to normal the high cost of living here will really be obvious.

[masons_dad1]

On an entirely separate note, you should take a trip to other cities and see that NWA mall is pretty much the same as every other mall. ALL malls took a turn for the fashion clothing scene in the last ten years, as a matter of fact, they all pretty much have the SAME stores plus or minus a few. As stores such as Best Buy, CompUSA, Furniture Row, etc were becoming really popular, the equivalent fled the malls of the country. I know the World of Science store was doing really good here and that it was the parent company that had issues, but that really proves the point. We were an anomaly, that same type of store wasn't doing so hot nation wide because it DEPENDED on a mall to work and the malls themselves were changing.

Oh I forgot. I've lived all over the country and travel each year to Texas, Louisiana and Florida. NWA Mall is typical of a fashion mall and there are many malls that have a much better variety of stores and other mall amenities. A great example is another Macerich mall called Valley View in Dallas. Valley View was headed down the path of a dead mall until Macerich made a few changes. The mall features Foley

[Aporkalypse]

Have you ever been to Sarasota-Bradenton, Ft Myers-Cape Coral, and Naples-Marco Island? They are like Beverly Hills compared to the Fayetteville metro. Of course housing is more expensive in those places because they cater to the very wealthy. Fayetteville has no excuse for not having adequate affordable housing. I've been looking at all the realtors websites and haven't found a decent starter home under $100,000 and those I did find are nothing but trailers. It's going to take a lot of work for people making modest incomes to find a decent starter home in Northwest Arkansas. I only know of one person who bought a brand new custom home in Bentonville for under $100,000 so I do have hope that someday I may own a home here. Housing cost is only really just a part of cost of living. There's also utilities, groceries, fuel prices and taxes to consider, which the Fayetteville metro is definitely far from the most affordable metro in those areas. Like I said you get what you pay for and when all the hype about NWA wears off and things get back to normal the high cost of living here will really be obvious.

I've been to all of these places, I wonder if you have. You missed the plethora or trailer parks if you did. There are poor areas and nice areas there like everywhere else. I've been to ghetto in Ft Myers, straight up. There are people living in $200k trailers in all of these areas in FL. Hell, in the Keys there are people living in million dollar trailers.

Owning a new home under $100k is difficult to do ANYWHERE, whether it's NWA, Little Rock, or anywhere else that isn't just blatantly rural. In DFW you can find some opportunities but they are way out on the metro's outskirts and this area is one of the cheapest metros in the country to live in. In virtually all of CA you can't buy a lot for less than $250k and the median home price is $530k for the state as a whole. DFW and Little Rock prices are virtually identical to NWA and there are plenty of nice starter homes that are 2-3 decades old running between $100-150k. You can find some needing some work for under $100k.

I think the problem is that if you see $100k as the threshold of affordability, you're not going to be able to afford much of anything anywhere. It would be in your best interests to look in more rural areas where home prices are low because of lack of demand, though you'll still be looking at older houses as these areas seldom see much new construction.

Trust me, one reason I'm looking at going back to LR or NWA as places to settle down is because your dollar goes a long, long way in Arkansas. Admittedly, though, I'm looking a couple of notches up the housing market ladder.

[masons_dad1]

I've been to all of these places, I wonder if you have. You missed the plethora or trailer parks if you did. There are poor areas and nice areas there like everywhere else. I've been to ghetto in Ft Myers, straight up. There are people living in $200k trailers in all of these areas in FL. Hell, in the Keys there are people living in million dollar trailers.

Owning a new home under $100k is difficult to do ANYWHERE, whether it's NWA, Little Rock, or anywhere else that isn't just blatantly rural. In DFW you can find some opportunities but they are way out on the metro's outskirts and this area is one of the cheapest metros in the country to live in. In virtually all of CA you can't buy a lot for less than $250k and the median home price is $530k for the state as a whole. DFW and Little Rock prices are virtually identical to NWA and there are plenty of nice starter homes that are 2-3 decades old running between $100-150k. You can find some needing some work for under $100k.

I think the problem is that if you see $100k as the threshold of affordability, you're not going to be able to afford much of anything anywhere. It would be in your best interests to look in more rural areas where home prices are low because of lack of demand, though you'll still be looking at older houses as these areas seldom see much new construction.

Trust me, one reason I'm looking at going back to LR or NWA as places to settle down is because your dollar goes a long, long way in Arkansas. Admittedly, though, I'm looking a couple of notches up the housing market ladder.

I lived in St. Petersburg, FL and made regular trips to Sarasota, Bradenton, Ft Myers and Naples/Marco Island. Those are very diverse areas with both poor people and rich people sharing the same community. The people there love it because it has some of Floridas best beaches. When you say I see $100K as the threshold of affordability you have to remember that the greater majority of people living in the US including the federal government see this as the threshold of affordability. It's understandable that wealthy people tend to think everyone should be just as wealthy or they're just lazy and don't deserve to own a home. It's great that you can afford a million dollar home, but you're in the minority.

[slyder1]

I've been to all of these places, I wonder if you have. You missed the plethora or trailer parks if you did. There are poor areas and nice areas there like everywhere else. I've been to ghetto in Ft Myers, straight up. There are people living in $200k trailers in all of these areas in FL. Hell, in the Keys there are people living in million dollar trailers.

Owning a new home under $100k is difficult to do ANYWHERE, whether it's NWA, Little Rock, or anywhere else that isn't just blatantly rural. In DFW you can find some opportunities but they are way out on the metro's outskirts and this area is one of the cheapest metros in the country to live in. In virtually all of CA you can't buy a lot for less than $250k and the median home price is $530k for the state as a whole. DFW and Little Rock prices are virtually identical to NWA and there are plenty of nice starter homes that are 2-3 decades old running between $100-150k. You can find some needing some work for under $100k.

I think the problem is that if you see $100k as the threshold of affordability, you're not going to be able to afford much of anything anywhere. It would be in your best interests to look in more rural areas where home prices are low because of lack of demand, though you'll still be looking at older houses as these areas seldom see much new construction.

Trust me, one reason I'm looking at going back to LR or NWA as places to settle down is because your dollar goes a long, long way in Arkansas. Admittedly, though, I'm looking a couple of notches up the housing market ladder.

It really doesn't make much sense for you to compare NWA to metros in CA and FL. First of all these cities are on or by an ocean! No joke they are going to be higher, there is no relevance to what you are saying because cities on or near the ocean are "duh" always going to be higher. Plus add in the fact that there are 1,000's of multi-million dollar fantasy homes that drive up the price of everything else. Anyone in the right mind knows that if you move to a state let alone a metro area by the ocean you are going to pay the price, its common sense!

[Aporkalypse]

It really doesn't make much sense for you to compare NWA to metros in CA and FL. First of all these cities are on or by an ocean! No joke they are going to be higher, there is no relevance to what you are saying because cities on or near the ocean are "duh" always going to be higher. Plus add in the fact that there are 1,000's of multi-million dollar fantasy homes that drive up the price of everything else. Anyone in the right mind knows that if you move to a state let alone a metro area by the ocean you are going to pay the price, its common sense!

Read the whole thread. I was just responding to masonsdad's statment:

"NWA already has one of the highest costs of living in small metros so if house prices keep going up NWA is going to also rank "Worst Place To Raise A Family" when both parents are forced to work just to get by. No point in having recreational amenities since people will be working 2 or 3 jobs so there won't be time for recreation. Education will suffer because kids will have to drop out and go to work to help with bills. But then I guess NWA could be "Best Place To Raise A Family If You're Rich"."

NWA shouldn't be like CA or FL. It should be like Texas, Oklahoma, or Missouri - states in which as I've said real estate is easily affordable just as it is in NWA. These areas have tons of land to spread out to. This is ultimately why NWA will have affordable prices - land. High housing prices are dictated by the cost of the dirt underneath them. As you said, Thankfully, NWA has plenty of land to grow. While the Pinnacle area may have high property values, there are always going to be a lot of affordable areas.

[masons_dad1]

Read the whole thread. I was just responding to masonsdad's statment:

"NWA already has one of the highest costs of living in small metros so if house prices keep going up NWA is going to also rank "Worst Place To Raise A Family" when both parents are forced to work just to get by. No point in having recreational amenities since people will be working 2 or 3 jobs so there won't be time for recreation. Education will suffer because kids will have to drop out and go to work to help with bills. But then I guess NWA could be "Best Place To Raise A Family If You're Rich"."

NWA shouldn't be like CA or FL. It should be like Texas, Oklahoma, or Missouri - states in which as I've said real estate is easily affordable just as it is in NWA. These areas have tons of land to spread out to. This is ultimately why NWA will have affordable prices - land. High housing prices are dictated by the cost of the dirt underneath them. As you said, Thankfully, NWA has plenty of land to grow. While the Pinnacle area may have high property values, there are always going to be a lot of affordable areas.

I can see your point now when you say that there will be more affordable areas further away from all the developments and the subdivisions in Pea Ridge do seem to be more affordable than those in Fayetteville and Rogers. My brother lives in Denton, TX about 30 or so miles north of Dallas and he bought a house for $125,000 that originally appraised for over $200,000. It's in a very nice neighborhood, but there really isn't much in Denton that I could see. I guess it's cheaper because of the commute to work in Dallas or even Plano.