Strong Economic Conditions and Tight Housing Market Conditions in the Fayetteville HMA
Randall Goodnight is the lead economist for the Oklahoma City Field Office for HUD's Economic and Market Analysis Division
HUD’s Comprehensive Housing Market Analyses provide information on changes in local economies, housing markets, and populations and provide 3-year forecasts for demand in the area. This article is part of a series that sheds light on the content of these analyses.
The Fayetteville-Springdale-Rogers Housing Market Area (Fayetteville HMA) is coterminous with the Fayetteville-Springdale-Rogers, AR-MO Metropolitan Statistical Area (MSA) and includes Benton, Madison, and Washington Counties in northwest Arkansas and McDonald County in southwest Missouri. Located in the Ozark Mountains, the HMA draws residents and visitors to its numerous state parks, more than 500 miles of lake shoreline, and numerous entertainment and sports events, including University of Arkansas football games. The current population of the Fayetteville HMA is estimated at 600,000, an average annual increase of 2.1 percent since 2010. A recent comprehensive housing market analysis highlighted economic and housing market activity in the Fayetteville HMA. This report reflects local conditions as of August 2022.
A strong local economy led by the professional and business services sector
The Fayetteville HMA economy expanded rapidly during the past year and has completely recovered from job losses that occurred in April 2020 from the COVID-19 pandemic. The HMA recovered all pandemic-related job losses by September 2021 compared with May 2022 for the nation as a whole. During the 12 months ending July 2022, nonfarm payrolls in the HMA increased by 14,600, or 5.5 percent, to 281,200 jobs, with gains occurring in all 11 job sectors. The professional and business services sector led job growth, accounting for nearly one-third of the total increase. The unemployment rate in the Fayetteville HMA during this period was 2.4 percent.
The professional and business services sector is also the largest job sector in the HMA, accounting for one-fifth of nonfarm payrolls. The size of this sector can be attributed in part to a significant corporate presence in the HMA. Walmart Inc. and Tyson Foods, Inc. not only have located their corporate headquarters in the HMA but also are its largest employers, with 29,600 and 7,500 workers, respectively. Walmart and Tyson Foods also have various support, distribution, data processing, and operational facilities throughout the HMA that contribute to numerous job sectors. The University of Arkansas, with 4,775 full-time workers, is the third largest employer in the HMA.
During the next 3 years, job growth is estimated at an average of 2.6 percent annually, partly because of expansions of the corporate headquarters of Walmart and Tyson Foods.
Tight home sales and rental markets reflect strong demand for housing
Home sales demand stemming from strong population and job growth during most years since 2010 contributed to tight home sales market conditions in the HMA. The home sales vacancy rate is currently an estimated 1.2 percent, down from 3.8 percent in 2010. During July 2022, the number of available homes for sale represented a 1.5-month supply compared with 12.9 months in 2010. During the 12 months ending July 2022, home sales totaled 17,550, down 5 percent compared with a year earlier, when home sales increased 14 percent from the previous year to 18,550, a level that represents the largest number of home sales during a 12-month period since at least 2000. The average home sales price was $325,900, representing an increase of $60,350, or 23 percent, the greatest increase in the average home price since at least 2001. Strong home sales demand in the HMA during most of the past 2 years contributed to a significant increase in home construction activity, which reached a record 5,800 homes permitted during the 12 months ending July 2022, up 5 percent compared with a year earlier, when home construction activity increased 25 percent from the previous year and was at that time at a record level. During the next 3 years, demand is estimated for 14,000 new homes.
Rental market conditions in the HMA are currently tight, with an estimated vacancy rate of 6.5 percent, down from 13.9 percent in 2010. The market-rate apartment market is also tight with an average vacancy rate during the second quarter of 2022 of 2.3 percent, down slightly from 2.5 percent a year earlier and down from 4.1 percent 2 years earlier. By comparison, the average apartment vacancy rate was 6.8 percent in the second quarter of 2010. Tight apartment market conditions stemming from the relatively fast recovery of the local economy and strong population growth contributed to strong rent growth during the past year. The average apartment rent during the second quarter of 2022 increased 12 percent to $970 compared with a year earlier, representing the fastest rate of increase since at least 2001. A limited inventory of homes for sale and strong home price growth also contributed to strong apartment demand and rent growth during the past year. Rental construction activity in the HMA increased 20 percent to an estimated 2,400 units permitted during the 12 months ending July 2022 as developers responded to tight apartment market conditions. The HMA rental market benefits significantly from University of Arkansas student enrollment. Students at the university who reside off-campus currently account for an estimated 8 percent of renter households in the HMA. During the next 3 years, demand is estimated for 6,475 new rental units.