By Callan Smith Rose Law Group Reporter Social Media Coordinator
The take-away from today’s Tucson market report given by Jim Belfiore of Belfiore Real Estate Consulting was healthy employment growth for the area. However, job growth has not, as of yet, led to increased new home sales.
In July traffic was down 16 percent YOY. On average, builders sold 1.5 homes per subdivision in July, down from the annual peak of 2.5, reached in May. The number of new home communities is up, with a total of 109 on the market. Of the Tucson market, Belfiore stated, “I think the market is in flux. If we looked at Phoenix, this market has followed Phoenix at about 14 to 18 months behind in growth.”
One difference noted in the Tucson market are the unique choices for new-home buyers. Developers and builders have put the work in to create the right products, with the right amenities in the right locations. The top builders by average sales per subdivision in the Tucson market in July were Richmond American, D.R. Horton, Pulte, KB Homes, and Meritage, Belfiore said.
The Tucson existing home market is most assuredly a sellers’ market for buyers seeking to purchase a home at $500,000 or below in sale price. Existing home supplies are down 19% YOY, Long Realty data states. Surprisingly, home prices have not shown a substantial increase as of yet, but Belfiore stated home prices are expected to appreciate at a healthy pace over the next four to six months due to the low availability of existing homes.
Another factor to consider in the market is permitting, which was down by 40 percent in July. Fewer permits are being pulled by builders, who appear to be taking less risk, anticipating the further slow down through the winter months. Belfiore said that tightening supply will lead to appreciation, which remains a challenge, “because the cost of building homes is not going down, and appreciation is needed.”
Regarding sales, Belfiore says buyers are picky, astute, cautious, price sensitive, and slower in the decision-making process, which makes hitting the right price extremely difficult for new homes coming onto the market. Moreover, new home prices this year did not meet expectations only increasing nine-tenths of a percent.
Belfiore said it’s an interesting time with challenges pertaining to home prices, absorption and for builders looking to buy lots. He went on to say, “I think we’re going to start to see it come back. We’re projecting three-and-a-half to five-and-a-half percent appreciation, net with incentives. If this market follows our projections for Phoenix—and I say projections because the forecast hasn’t come to fruition in Phoenix yet—the tremendous pricing pressure in Phoenix is going to yield in our opinion six to eight percent appreciation next year. This market didn’t lose as much, gain as much, but I do feel really good about appreciation next year, much better than I have the past couple of years.”
Overall, job growth in the Tucson market looks to be the biggest positive that could lend to gains in new home creation and sales for the area.
For further information, contact Belfiore Real Estate Consulting.