Condo project's success not spurring new development in Tucson despite housing shortage

New condominiums at the base of Tucson’s Catalina Foothills sold out as soon as they were completed and more units are under construction.

But, despite this development’s success, Placita Escondida Condominiums are the only brand-new condos under construction in the Tucson area.

“With the rise in home prices, you’d think we’d see more,” said native Tucsonan Andy Courtney, developer of the project on River Road and Campbell Avenue. “Interest is high and we’re seeing brisk sales.”

Challenges to developing condos include zoning because many neighbors object to bringing more residents into their neighborhood.

“It’s harder to find the land that allows for these kinds of projects,” Courtney said. “Just because the word ‘density’ is in the mix doesn’t mean it’s a bad thing.”

Originally a 73-unit apartment complex, Placita Escondida was converted to condominiums for sale as leases expired.

The remodeled units sold quickly and phase 2 commenced with three new buildings constructed that have 12 condominiums each.

Phase 2 also sold out and Courtney, owner of Andy Courtney Properties, is now working on phase 3.

The three additional buildings will also have 12 condominiums each.

As new home prices have climbed sharply in the past few years — with the average price approaching the $500,000 mark — the condominiums are priced under $400,000.

Prices range from $285,000 for a one-bedroom condo to $380,000 for a two-bedroom.

“It’s a pretty good value,” Courtney said. “I was in Austin, Texas, and they’re building condos downtown with a starting price of $699,000.”

To date, the mix of buyers at Placita Escondida has been first-time homeowners, retirees downsizing and winter visitors looking for a second home.

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There are also all-cash investors who have bought units as rental property.

Condos are defined as stacked units for sale, not townhomes or other attached single-family properties.

Creating condos in Tucson was of high interest in 2005, 2006 and 2007 when the housing market was hot.

Several projects, predominantly downtown, were in varying stages of development when the housing crash brought most of them to a halt and enthusiasm for developing them has not returned.

According to the Washington D.C.-based Urban Institute, a social and economic policy institution, construction of condominiums is at an all-time low across the country.

“This trend has persisted even though demographic patterns are boosting the need for condos, and the shortage is adding to concerns about the lack of affordability in the homebuying market,” the institute reports. “Condos can present a key path to first-time homeownership.”

Financing is a big hurdle.

For example, some lenders will not give a prospective condo buyer a loan unless at least 50% of the condo units are owner-occupied and the Federal Housing Administration requires that no more than 10% of the units in the complex have FHA loans.

Many developers, even ones who once considered condominiums, are instead building multifamily units for rent.

Still, Courtney believes the success of Placita Escondida illustrates the need for the alternative for-sale housing in the Tucson market.

He has another project in the works near Tucson Mall that will be a 76-unit development and said details are still being penciled out.

To learn more about the Placita Escondida project, visit placitaescondida.com.