insideyournwa.com

Ok.  We’ve talked a lot about the market correction here in Northwest Arkansas and throughout the country.  But as a buyer or seller it must be confusing as to what it means for you.  As you know, Joe and I will be going LIVE on KERM radio New Year’s Day.  Perhaps its best to start the show out by discussing the market in detail as we begin ‘07.  So here is a summary of what we’ll be discussing.

Buyers First…

Owner Occupant or End User

The events that have unfolded over the past several years have left us in an extremely unusual position…a buyer’s market with low interest rates.  Generally a buyer’s market occurs because of rising interest rates or plummeting incomes and/or unemplyment.  This situation is unique, because recent job figures and income levels are strong, interest rates are still historically low, yet buyer’s have the upper hand in negotiations.  Rarely has the opportunity to buy been so great.  Negatives:  If you believe that the correction is only in its early stages and prices will still drop substantially, you might still be buying too high and put yourself in a negative situation.  However, in our local market, with growth remaining strong, this is extremely unlikely and your equity from leverage will surface very soon.  Outlook:  Strong

Multi Family or Single Family Investor

Again, an investor right now has a great opportunity for leverage, particularly in multiple single family investments.  Many sellers are builders and are in desperate positions to sell.  If a property looks like it can cash flow then “holding” for 3-5 years could prove profitable.  Multi family properties are not “oversupplied” and their prices are predicated on income rather than “end user” value, therefore their price fluctuates with interest rates rather than supply and demand.  The fear of buying in NWA might cause buyers to look at renting in the short term and therefore increase rents, income, and ultimately value.  However, when buying multi-family investments, the strategy is long term holds and tax benefits.  From this standpoint, the multi family market has always been strong and will remain so.  Outlook:  Steady

Commercial (Income Producing)

Similar to multi family, this investment is a long term strategy and is predicated on income and tax benefits.  However, anytime one is considering commercial property, demand must be considered.  Be sure to check rent rolls and determine lease terms.  If the age of the building is older but rents are low, there may be a rehab opportunity.  Generally, commercial property in NWA is strong.  So long as someone makes a wise investment regarding location and price, I can’t see a reason why Northwest Arkansas wouldn’t be one of the more attractive investments around the country.  When considering a commercial investment, look to retail or warehouse space over office space.  Contrary to popular belief, retail space throughout NWA is lacking and as incomes and unemployment stay positive, the demand will only grow.  Office space is still a good investment but the key is when vacany rates lower.  The demand for office space has always been high in NWA Arkansas, but so has the supply.  Wait to see an opportunity when the two collide and that’s when you’ll come out best.  Outlook: Steady

Commercial land (raw)

While commercial investments are generally positive, developing raw land for commercial use carries a slight degree of risk.  Building costs remain high and the area must be tenant ready rather than speculative.  Look for locations close to major arteries (there aren’t many in NWA) or 540.  As is always the case, also consider looking in expanding communities where commercial demand is strong following the residential explsion of the past several years.  Outlook: Below Average

Residential land (raw)

It will take through 2017 for Northwest Arkansas to absorb its developed but vacant residential lots.  This is where there are some problems that would be deemed “major”.  Granted, there are vacant houses in Northwest Arkansas, lots of them, but with demand those homes can be absorbed within a few years.  When supply falls back in line with residential housing, only then will the demand for vacant lots begin to eat away at the year 2017.  If your considering the purchase of residential land look for two things.  #1.  Close to 540 or major artery.  #2.  Cheap.  The only way to profit on raw residential land is for your developed lot costs to be substantially lower than the glut already on the market.  There may be opportunties out there but be very careful.  In addition, considering current trends, a bank might not even talk to you about it.  Outlook: Extremely Poor

You’ll have to wait till tomorrow to hear the seller’s outlook.  I have to do last minute Christmas shopping.