As I teased in the July Market Statistics update, I dug into the data for Residential New Construction in NWA and found significant changes over the last 10 years (2013 to 2023). In the most broad statement I can make, new construction has *boomed* in NWA over the last decade; with an especially significant jump in activity levels starting in 2021. We’re talking multiple triple-digit percent increases over that time…some metrics saw over a 500% increase! This is all in response to keeping up with demands from population growth in the area, investors scooping up investment properties during historically low interest rates, and existing homeowners scaling-up to larger properties. Just yesterday, I had a meeting with a mortgage broker, and she was telling me how NWA is still 20,000 housing unit short of the supply needed for the projected growth. This is yet another clear indicator new construction trends will continue to be strong.
One quick note, the data for 2023 includes only January to July. None of the numbers mentioned for 2023 are extrapolations or projections of annual numbers; unless it is specifically indicated as “estimated” or “pace for 2023” for the year. This is to say, take the 2023 numbers with a grain of salt knowing they will obviously be different to end the year. To make it easier to digest, I broke the statistics down into 3 main sections: counts, dollars, and county (corresponding to the 3 rows of the graphic); breaking each of those categories down further into a few subcategories. For those who would rather scratch their eyes out than read through a bunch of statistics, stop here and enjoy the graphic. It tells the majority of the story. For those that love the numbers, let’s dive in!
TRANSACTION COUNTS
New Construction Residential Closed Sales
2013 averaged less than 90 new construction properties sold per month. Through July 2023, we average just over 300 sold per month. That’s 3.5 times more than a decade ago. During that time, NWA still averaged less than 200 new construction sold per month until 2021 (230 sold/month in 2021 and 250 sold/month in 2022).
New Construction Closed as a Percentage of All Residential Sales
In 2013 new construction made up about 13.5% of all residential sales. As of the end of July of this year, new construction made up 34.2% of all residential sales. Meaning, new construction makes up 2.5 times more of all sales in NWA as it did 10 years ago. New construction went from barely being 1 out of every 8 sales to being 1 in every 3 sales! New construction made up less than 20% of sales up until 2021, when it finally made up 21% (and 25% in 2022).
THE DOLLARS
New Construction Median Sell Price
For 2013, the median sales price of new construction was $222,900. Whereas the median sales price for 2023 through July is $357,175; a 160% increase. Last year was the first time in NWA the median sales price for new construction surpassed the $300K mark; when it set the benchmark of $341,495. In fact, just in the last 2 years, the median sales price has increased a staggering $82K; an increase that prior to 2021 had taken more than a decade to be realized.
New Construction Price Per Square Foot
Ten years ago, the average price per square foot for new construction was $106/SQFT; a dreamy number now long extinct in NWA. Compare that to through July 2023, the same metric came in at $201/SQFT. That’s an annual inflation rate of about 6.5% per year; well outpacing the 3% to 4% inflation of construction materials during that same 10-year span. However, the majority of this increase (64%) has occurred since 2020. In fact, the average price per square foot was still under $150/SQFT until 2021 ($168/SQFT in 2021 and $196/SQFT in 2022).
New Construction Sales Dollars
2013 had an average just under $22M per month in sales of new construction homes. This year NWA is averaging $123.5M per month. That’s a whopping 564% increase! In fact, this year 1 in every 3 dollars of closed residential real estate in NWA is from new construction. If the pace for 2023 continues, it will be the first year new construction made up more than 30% of total sales dollars. Another couple notable fun-facts are 2022 was the first year new construction total sales surpassed ONE BILLION dollars in NWA; and in just the first 7 months of 2023, NWA has almost matched the total new construction sold for the entire year of 2021! Not surprisingly, 2023 is on pace to set another record year (an active 10+ year streak) for total dollars of new construction at an estimated $1.5 Billion.
BENTON VS. WASHINGTON COUNTY
New Construction in Benton County
Benton County averaged 62 sales per month for new construction in 2013, but as of July, the county is averaging 211 sale per month for 2023; 3.4 times more. There has never been a year when Benton County averaged more than 200 new construction sales per month, but if the current trend continues, 2023 will do just that. Benton County has accounted for between 62%-70% of all new construction sales every year for the last 10 years.
New Construction in Washington County
Washington County, always in the economic shadow of Benton County, only averaged 26 sales per month of new construction; which has increased to an average of 95 sales per month in 2023. Still a very respectable 367% growth over the decade. In fact, Washington County had never had a single month with more than 100 closed residential new construction properties until May of THIS YEAR. Each of the last 10 years, Washington County has accounted for between 25% to 36% of all new construction sales.
Depending on the year, approximately 0.2% to 3% of new construction sales listed in the NABOR MLS occurs outside of Benton or Washington counties. But generally speaking, for every 3 new construction houses sold, 2 occur in Benton County, and 1 in Washington County. Or in other words, for every 2 houses built in Benton County only 1 is built in Washington.
As a complete side note, in doing this research I found a listing with a significant error; that skewed the data 5,000% of one month. After providing all information to the MLS about the error, the MLS corrected the listing. If nothing else, I’m thrilled to say this research yielded an actual result (even if I’m the only person that will ever look up the statistic).