The more than 120 real estate experts gathered at the Ritz-Carlton, Dove Mountain, Thursday afternoon were generally bullish about the future of Tucson housing, but hopes for a rebound mirroring the boom of the 1990s and 2000s were gone.
“We’re striving in the next five years to get back to 1991 levels,” said keynote speaker Will White of the Land Advisors Organization, referring to permitting goals.
The aim of 3,500 annual permits by 2018 isn’t even in the same league as the nearly 12,000 permits pulled in the Tucson area in 2005.
The major predictions shared at the meeting:
1 A shortage of ready-to-build lots is coming.
Because people are buying homes at a relatively slow pace, developers are preparing lots at a similarly slow pace.
That means that if demand picks up abruptly, builders find themselves in a crunch, without land that’s ready to go.
The result is what White calls “mini-cycles,” which pose problems for affordability. When demand increases, ready-to-go lots become rare, pushing up their price.
It’s a cycle White predicts will continue.
2 Affordability is key.
Ginger Kneup
of Bright Future Real Estate Research thinks Tucson can shake that pattern if developers and builders focus more on providing cheaper new homes.
The typical price of a new home is about 50 percent more than the typical price of an existing home, she said, and that is depressing new home sales.
Developers and builders need to let go of the price expectations they formed during the boom and set prices at a level that reflects the new reality, Kneup said.
For new homes to comprise 30 percent of homes sold in the Tucson area in a year — normal levels, she said — the price premium would have to drop to about 20 percent, and more new homes would need to be priced from $160,000 to $236,000.
The underlying issue, of course, is sluggish job growth.
3 2016 is the pivotal year.
White and Kneup agree that 2016 could be the turnaround year. Demand is expected to pick up, and developers have just enough time to prepare lots for a surge in builder interest.
But not everyone is sour on the current market. “If these are bad times, then I’m sure enjoying the bad times,” said David Mehl of Cottonwood Properties, which developed Dove Mountain.
