While national indicators show that the economy is slowly recovering, the economy of Conway and Faulkner County appears stagnant. Sales tax collections are up less than one percent, the unemployment rate has increased to state and national levels, and construction is at a 10-year low.
The construction industry and particularly home construction is an important engine in our local economy. Home construction generates jobs, retail sales, and sales tax and real estate tax revenue.
Table 1 shows statistics for single-family home construction in Conway for the most recent six years. In 2013 only 147 building permits were issued. Not only was this the lowest since the recession started in 2008, it is the lowest since 1992 when I began tracking this data.
Other trends are apparent in Table 1: houses are getting larger (up 7%), more costly (11% increase), and consequently more valuable (up 18%). These trends imply that fewer entry-level homes are being constructed. In fact, only 19 houses had construction costs of $100,000 or less. These19 represent just 13% of the houses constructed.
Another factor that has raised the price of housing in Conway is that infrastructure development costs have escalated. The average construction cost of $228,278 for homes built in 2013 does not include the cost of the lot. Lots run from $35,000 to as high as $100,000. This puts the average cost of a newly constructed home into the $250 - $300 thousand range, which is well above the budget of many buyers, particularly first time homeowners.
When other residential units (duplexes and apartments) are added to the picture, 2013 remains a disappointment. Except for 2011, the 299 total family units built in 2013 were the lowest since 1992.
The national picture, however, is fairly rosy. The National Association of Home Builders forecast a 17% increase in single-family home construction in 2013 and a 24% increase in 2014. According to NAHB Chief Economist David Crowe last fall, "The previous three months for new-home sales have all been revised up, and the final quarter of 2013 is shaping up to be the best quarter since the second quarter of 2008. Historically low interest rates, affordable home prices and a healing economy are bringing buyers back into the marketplace." This is not the story in Conway Arkansas.
Why is Conway lagging in home construction when it has been so robust in previous years? There is no single answer; a combination of factors is at work. Although interest rates have remained low, it is more difficult to qualify for loans so many first time home shoppers are shut out of the market. The increased regulation of the home mortgage industry was a result of the mortgage crises of 2008. Also, the population of Conway is not expanding at the same rate as earlier. From 2000 to 2010 the population increased from 43,167 to 58,908, an average increase of 1574 per year. From 2010 to 2012 the population increased to 61,246, an average of 1169 per year. Local economic events have contributed: a moderating natural gas industry and layoffs at Acxiom and Hewlett Packard. Finally, the recession has produced a less mobile population, nationwide.
But what about commercial construction? Is it down too? In a word, Yes. Table 2 shows the value of all construction for the past six years for both residential and commercial. This includes new construction, remodeling and additions. Table 2 shows that commercial construction in 2013 ($59.5 million) was back down to the level of 2008 ($58.9 million) after a 5-year upward trend that ended in 2012. An overall statistic is that the total residential and commercial construction in 2013 ($110 million) is only 78 percent of the total six years ago.
In 2012 the largest commercial permit was approximately $52 million at the new Conway Airport. In 2013 the largest project granted a permit was Faulkner County’s Criminal Justice System located on South German Lane ($10.6 million). Other 2013 projects that ranged from $3 million to $5.5 million were: Hendrix Stadium ($3.0), CBC Library ($3.4), Crain KIA Dealership ($3.5), Hendrix Village Dorms ($4.2), Walmart Neighborhood Market ($4.9) and Second Baptist Church ($5.5).
The conclusion seems clear: The construction industry is still in the tank. Is 2013 the start of a downward trend or is it just one of the usual downs of our up-and-down economy? I am optimistic that we will have an upward trend in construction as well as the economy in general. Conway and Faulkner County seems to lag behind economic trends. As the construction industry is rebounding nationally, we will follow.
I thank my friend Chris Spatz for editing and helping me with this article.
You can obtain more information on the economy of Conway and Faulkner County by going to the Pulse of Conway website (www.pulseofconway.com).