The real estate market has been dealing with a shortage of new construction homes. This shortage has contributed to rising prices and limited inventory. This is especially true in Arkansas, where the demand for housing continues to outpace the supply of new builds. And, although the U.S. Department of Housing and Urban Development reported a 5.7% increase in housing starts in the month of April, the increase was due to more multi-family developments. Single-family home construction actually dropped even more.

Trends in New Construction: A Double-Edged Sword

Some of the most popular features in new construction homes in Arkansas include:

Open floor plans and open concept designs. These layouts create a seamless flow between living spaces like the kitchen, dining, and living rooms, which is a feature many homebuyers are looking for in a home.

Primary bathroom suites are also popular. Many homeowners want a luxurious and private retreat within the home.

Stainless steel appliances are commonly found in new construction homes, adding a modern and sleek aesthetic to the kitchen.

One of the biggest trends in new construction is the emphasis on sustainable and energy-efficient homes. More and more buyers are looking for properties that incorporate eco-friendly features, such as solar panels, energy-efficient appliances, and water-saving fixtures. These homes not only appeal to environmentally conscious buyers but also offer long-term cost savings through reduced utility bills.

Another trend is the growing popularity of smart home technology. Builders are being expected to integrate advanced systems that allow homeowners to control things like lighting, temperature, and security, through their smartphones or by voice commands. This level of convenience and automation is becoming very popular, especially with younger buyers.

Now for the other edge of that double-edged sword: these features also drive up the cost of construction in both labor and materials, making it more difficult for builders to fund new builds. They also drive up the cost of the home itself to prospective home buyers in an already difficult market.

New construction homes in Northwest Arkansas, specifically in areas like Bentonville, Centerton, Springdale, Pea Ridge, and Siloam Springs, are in high demand due to the region's highly rated school districts, outdoor recreational opportunities, and proximity to major employers.

Lack of New Construction and Its Impact

The lack of new construction has been a persistent issue in the real estate market, made worse by labor shortages, supply chain disruptions, and rising material costs. In Arkansas, the shortage of new homes has contributed to a highly competitive market, with buyers often facing bidding wars and paying well above asking prices.

The limited supply of new construction has also had a ripple effect on the existing home market. With fewer new homes available, buyers have turned their attention to older properties, driving up prices and further straining inventory levels.

In addition, out-of-state buyers coming from an area where housing and land prices are more expensive, are buying properties at higher than normal prices, artificially inflating the cost of land and homes.

The combination of these factors have made it increasingly difficult for first-time buyers and those with limited budgets to enter the market.

Potential Solutions

1. Incentives for Builders: Local and state governments could offer incentives, such as tax credits or streamlined permitting processes, to encourage more builders to enter the market and increase the pace of new construction.

2. Workforce Development: Investing in workforce development programs and vocational training could help address the labor shortage in the construction industry, ensuring a steady supply of skilled workers.

3. Innovative Construction Methods: Exploring alternative construction methods, such as modular or prefabricated homes, could potentially reduce build times and costs, making new construction more accessible.

4. Zoning and Land Use Reforms: Reviewing and updating zoning laws and land use regulations could open up more areas for residential development, increasing the availability of land for new construction.

By implementing these solutions, the real estate market in Arkansas and beyond could see an increase in new construction homes, alleviating the supply shortage and providing more options for buyers.

Let us know what other possible solutions you might have.

In the meantime…

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