After a rough start to the year, sales of new homes in Tucson have taken an upswing to levels not seen since 2007.
The closings for both May, at 362, and June, at 348, are the highest monthly levels since the year before the housing crash, data from R.L. Brown Reports shows.
But, at the current rate of construction, the Tucson market is at least five years away from catching up with demand and seeing any cooling of new home prices.
Homebuilders, apparently feeling the optimism, pulled 329 new-home permits in June, an 18.77% increase over June 2022.
“Tucson is holding its own during this period of uncertainty in the housing market,” said David Godlewski, president of the Southern Arizona Home Builders Association. “We expect this momentum to continue for the second half of the year.”
While other markets in the country experienced big setbacks in new home construction, the Tucson area has maintained a steady pace following a pause last year.
New housing has been helped by the lack of resale homes on the market, as owners cling to low mortgage rates.
June saw a 25.22% drop in the number of existing home sales compared to June 2022.
That is driving homebuyers to new homes, which impacts the price.
The average new home price stands at $479,744 and the average resale price is $414,483.
“I don’t see prices coming down because the market is so lopsided,” said Craig Thompson, president of the Multiple Listing Service Of Southern Arizona. If we stay on a steady pace, we won’t be able to catch up with demand for at least five years.
“There’s much more demand than there is supply which is going to keep prices up.”
Thompson said the demand comes from new residents and existing residents whose life circumstances have changed.
“When families go from having two kids to three kids, they just have to move,” he said. “The builders are building as fast as they can (but) at the end of the day, there’s just not enough existing homes.”
June data shows there were 1,593 existing homes for sale in the Tucson market, about a 1.8-month supply, with about 41 days on the market until sold.
A balanced market is considered one that has a five-month supply, Thompson said.
“The market will be tight for a long time.”
Balancing growth, resources
The Tucson housing market has outperformed other comparable metro areas in the nation because of strong population and economic growth, most notably due to the “trials and tribulations” of the California market, said local housing analyst Jim Daniel, with R.L. Brown Reports.
Sun Corridor Inc., the region’s main economic development agency, gave examples of California companies recently moving into the Tucson market including:
Chrome Hearts, a Hollywood luxury-goods manufacturer that will employ jewelers, upholsterers and carpenters at 8500 S. Rita Road
Pony.ai, an autonomous driving tech company from Fremont, California, that is partnering with Pima Community College and will base its operations at the new Automotive Technology & Innovation Center, 1255 N. Stone Ave.
Advanced Financial Co., based in Carlsbad, California, that provides consumer loans services for timeshare resorts and plans a major Tucson expansion at 5151 E. Broadway Blvd.
“We have grown so accustomed to positive growth and economic news that we now find ourselves believing in our own marketing pitch and broadly assuming that the good times will continue ad infinitum,” Daniel said. “It is hard … not just to expect it to continue given our local economic news and our expectation that our potential water woes will be mitigated by aggressive regional government actions.”
Godlewski agreed that the Tucson area has “a strong conservation ethic.”
“This has positioned us better than other parts of the state and gives builders confidence in continuing to invest here,” he said. “As a result, with careful planning, we can continue to achieve a balance between economic growth and protecting this precious resource.”
Getting in on the action
With the exception of a few new-home developments, such as Westbridge at Silverbell, near Silverbell and Grant roads; Corbett Village, near 29th Street and Wilmot Road; and Bella Tierra, near Irvington Road and Camino Seco, the majority of new building permits have been issued for the periphery of Tucson.
Sahuarita, Red Rock, Vail, Marana and Saddlebrooke are seeing the biggest number of new home permits.
Pepper Viner Homes is the only local homebuilder in R.L. Brown’s list for top permits issued with 27 in the past 12 months for one development. National homebuilder Meritage Homes, by comparison, had 440 permits in the same time period for multiple developments.
“We can expect competition to increase even among the present and new-to-arrive big builders with big appetites and big wallets seeking a piece of the action,” Daniel predicts. “It really was not that long ago that the acquisition frenzy all but eliminated the local builders from the marketplace, and that cycle is likely to occur and even intensify once again.”
Americans Are Overpaying for Homes, As Housing Market Remains Tight. According to a study by Florida Atlantic University, compared to historical prices, homebuyers in the most expensive cities in America are paying a premium of over 40%. Business Insider reports that Atlanta tops the list of the most overpriced cities in the United States. Five of the other top 10 most expensive cities in the U.S. are in Florida. Florida is so overvalued almost certainly because of the increased demand to live here combined with a shortage of available housing units, Ken H. Johnson, economist at FAU, via Business Insider. There are just not enough roofs to go around, given our population and Florida's stature as a prime destination, Ken H. Johnson, economist at FAU, via Business Insider. Business Insider reports that the housing market has remained tight in 2023, with mortgage rates and prices still high, leaving homeowners reluctant to sell. Here are some of the most expensive cities and the premiums between current costs and long-term prices. . Atlanta, Georgia, , +48.57%. Detroit, Michigan, , +45.80%. Tampa, Florida, +43.98%. North Port, Florida, +43.49%. Cape Coral, Florida, +43.35%
