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According to the latest housing report from the Arkansas Realtors Association, Benton County saw the biggest decline in homes sales in the state, falling a whopping 29.5 percent in January compared to January 2008.
Washington County didn’t do much better, with sales dropping 24.1 percent. Home sales across Arkansas fell a staggering 27 percent in January.
Our calculation shows a sales rate so slow in some neighborhoods that homeowners with properties valued at more than $500,000 may have to wait twenty years, or until hell freezes over, before a buyer steps forward.
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Vacancy rates in office buildings exceed 10 percent in virtually every major town in Northwest Arkansas and are rising rapidly, a sign of economic distress and overbuilding that could lead to yet another wave of problems for troubled lenders in the region.
With job cuts rampant and businesses retrenching, more empty commercial space is expected across Northwest Arkansas from Fayetteville to Fort Smith to Rogers to Bentonville in the coming year. Rental income will likely decline and property values will probably slide at a faster rate. The Urban Land Institute predicts 2009 will be the worst year for the commercial real estate market “since the wrenching 1991-1992 industry depression.”
While some white elephant spaces have been absorbed (e.g., Sam’s Club new offices in Bentonville), hundreds of commercial buildings stand empty, begging for tenants. Literally thousands of square feet of space in areas like historic district in downtown Rogers is substandard and will require major rehabbing or outright demolition in the next few years.
Stock analysts say commercial real estate is the next ticking time bomb for banks, which have already received hundreds of billions of dollars in capital and other assistance from the federal government. Big banks — like Bank of America, JPMorgan Chase and Morgan Stanley — each hold tens of billions of dollars in commercial real estate securities, including loans in Arkansas.
Regional banks in Northwest Arkansas should be an even bigger concern. In the last decade, most barreled their way into commercial real estate lending after being elbowed out of the credit card and consumer mortgage business by specialized and national players. The proportion of their lending that is in commercial real estate has nearly doubled in the last six years, according to government data.
