Despite thousands of new homes under construction in the Tucson area, there are fewer homes being built locally today than there were 20 years ago.
And while homebuilders are working to catch up, there is no indication home prices will come down.
For the first half of this year, permits for new homes were up more than 60% compared to the first six months of 2023.
Homebuilders pulled 2,610 permits for new homes from January through June, compared to 1,622 in that same time period last year.
With high interest rates spooking some would-be sellers, the lack of existing homes means more homebuyers are turning to new models.
Resale figures remain flat, with 7,493 existing homes sold in the first half of the year versus 8,129 in the first half of 2023.
Builder activity is highest at the Monarch community, west of Interstate 10 and Moore Road; Mandarina, east of I-10 and Tangerine Road; and Rocking K, off of Old Spanish Trail.
In June alone, three national homebuilders, D.R. Horton, Lennar and Meritage, bought 950 lots with the majority in those three developments, according to data from R.L. Brown Reports.
Predictions are the Tucson market could see more than 4,000 new home permits by the end of the year as demand for homes, which was expected to wane, is high.
There were 1,792 new home closings in the first half of the year, compared to 1,725 in 2023.
The current average new home price is $450,951.
“Builders have been very resilient and creative in the wake of the rising interest rates and increased costs associated with building homes,” said David Godlewski, president of the Southern Arizona Home Builders Association. “The builders have also created a pipeline of ‘move-in ready’ homes so buyers have an option if they prefer not to wait for a home to be built.
“Other important factors are the low number of resale homes on the market and the benefits associated with being able to customize a new home to your liking.”
New business announcements in Pima County and Pinal County continue to draw people to the area, hence the demand for housing.
“The region has weathered the challenges of mortgage interest rates and appears to be dealing with unprecedented cost and housing price increases, which…have not ‘killed’ the market as so many seers forecast,” said local housing analyst Jim Daniel, with R.L. Brown Reports. “The Tucson housing market continues to be what seemingly defies the expectations of doom and gloom that were so prevalent and remain so for many parts of the nation.”
Solving housing supply shortage may take years
Reaching or exceeding 4,000 permits for new homes this year is being celebrated in the industry, but it’s historically low.
In 1995, for example, there were 4,800 permits issued for new homes in the Tucson market. During the “boom” years, preceding the housing crash, builders got 8,000 to 11,000 permits a year between 2003 and 2006.
And, during the “regular years” the Tucson area saw an average of 7,000 permits for new homes between 2000 and 2002.
Meanwhile, today’s home prices are nearly double what they were 10 years ago, and the lack of supply is keeping those prices high.
“There is more demand than supply, economics 101,” said land broker Will White, who runs the Tucson office of Land Advisors Organization. “You can change policy and rates quickly, but you cannot create new supply overnight.
“It’s like turning a battleship around,” he said. “It could take three to five years to solve the supply shortage in Tucson metro. It’s that serious.”
Predictions that demand for housing would fall off during the pandemic and, again when interest rates rose, never materialized.
“We’ve had two head fakes, in essence,” White said. “Homebuilders paused because they thought it would be bad and took months off from land purchases. We can’t do that.”
He said there is no indication that home prices will come down because of the shortage of housing. Currently, homebuilders have enough land to build through 2025.
“We’re not going to get ahead of supply,” White said. “It may not be solvable.”
Homebuyers, volunteers, donors, staff and community members gathered in Midtown to celebrate Habitat Tucson’s 500th home built since 1980, within their newly built 7-home neighborhood. Habitat for Humanity Tucson partners with community members and families. The land for the new 7-home neighborhood was gifted by Miramonte Homes, Borderland Construction, Desert Earth Contracting, and Richard Studwell.
Video by Grace Trejo, Arizona Daily Star
