Tucson Housing Bust

bubble blog attack badgeSorry, if this breaks  anyone’s Housing Bubble, but there isn’t any housing bust in Tucson.   Quite the opposite.   The Average Sale Price for  resale in  October 2006 in Tucson was $266,854 which is an increase of $13,074 over September and the New Construction Average Sale Price was up  $34,162 from September to $311,658.

The Tucson Residential Real Estate Market continues to appreciate at a rate between 5 – 8% for the year.   While that is nothing like the increase over the last couple of years it is still a good rate of appreciation given what is happening in other real estate markets across the country.

What then is all the talk about lower prices, higher inventories, a buyers market, etc.

Let me  illustrate what has happened in the Tucson Real Estate Market.

asking price graphic

This year a huge gap opened between asking price and average sale price.   Summer of 05 saw increases in asking and sale price of up to $10,000 a month.   When Thanksgiving weekend 05 came it was like someone switched off the feeding frenzy and overnight it seemed there were no more buyers.

But sellers kept putting their homes on the market and no matter what a Comparative Market Analysis showed they wanted more.  

  •  
    • “We are in no hurry”
    • “Last year our neighbor  got . . .”
    • “Well,  let’s try it at this price we can always come down”
    • “Why isn’t anyone coming to see my house?”
    • “What are you doing to market it”
    • “My house is  worth more than that”

The result:

  •  
    • Homes are on the market much longer
    • Inventories of homes are up over 9400 (average approx.  4500)
    • Buyers  are frustrated with Seller unwillingness to budge on price
    • Sellers gradually lowering asking price but  still too high

Some homes have now been on the market for over a year, some have reduced their asking price over the course of that year by more than $100,000.   Even so, many are still too high for the market.   Comparative Market Analysis of these homes show that even with these kinds of reductions in asking price the price per square foot is more than other homes currently on the market.

We have a buyer’s market, record high inventories of homes, Asking prices coming down in some cases over $100,000 from last year.   The perception this leaves  “A Housing Bust must be happening.”   We have some buyers coming into our market seeing these things in the news and thinking they can  make a very low offer and have it accepted.   In many cases sellers won’t even counter the offer.

Tucson homes are appreciating in value.   Buyers can find reasonably priced homes, and sellers can sell their homes with reasonable appreciation in value.

Tucson Housing Bust? not here, not now.


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16 thoughts on “Tucson Housing Bust”

  1. Interesting to see not much is different down in the Old Pueblo. Tucson seemed a little later to the run-up than Phoenix was and never seemed to run quite as far as fast. I wouldn’t have expected to see any major crash there, unless Stoops was involved in some way.

  2. Jonathan,

    Even Stoops seems to be having an up market after the last couple of Saturdays. I just read your post on the Stats. They are similiar. I know your inventory is way up over last year like ours. An increased inventory, slower market seems to make people think there is a bust or slump of some kind. It appears not in Phoenix either.

  3. Dave, I think you might be giving too much credence to short term numbers. ie- September to October. In the Foothills I’ve seen big jumps in average sale price from one month to the next, then in the following months they’re back down to the more normal running average. With fewer sales the average is easily distorted by a couple of really high-priced homes selling.

  4. John,
    True the first paragraph are the short term numbers from October, but the overall numbers of 5 – 8% appreciation for the year are the ones that indicate there isn’t a housing bust.

    Even if they are just the numbers for a single month, they are the numbers. Unlike some areas of the country where actual appreciation is a negative of up to 40% devaluation.

    I just keep seeing the searches for Tucson Housing Bust coming to our site and know people are thinking the market has fallen apart, and the yearly as well as the monthly numbers for Tucson just don’t support it.

  5. So now it’s the average price that indicates market health. I thought it was the median. I guess that statistic won’t help sell homes.

    I wonder what would happen to the price trend if you used price per sq foot? Kerplunk!

  6. The Median is something that is only used for statisitcal purposes, not a true indicator of what is going on in the market, since you would have to know how many homes are on the market above and below the middle price to have any kind of indication.

    If you have a couple of condo conversions with 100 units each and they are selling for 160,000 then you have just introduced 200 units into the market that will reduce the median.

    Price per square foot goes up with the average sale price. If the average sale price is up so is the price per square foot.

    But the real indicator is that Arizona is appreciating at 16+ percent for the year and Tucson is at 14.9 percent for the first 11 months.

  7. As a guy who is doing online research with a plan toward buying in Saddlebrooke, I found your commentary on DOM most interesting. With the official number at around 60 & your research indicating 197+/- is far closer to correct. You are right, the number is really not worth anything.
    The whole situation “feels like” a stand off between buyers and sellers to me. Inventory way up, transactions down & the economy “iffy”. As a buyer, I believe I will do better than the seller in 2007. Just my humble opinion and time will tell.

    Chris

  8. The problem is with the delinquencies and forclosures. The prices are still way too high for most local workers to afford. The speculators are leaving so only the locals will be left to buy, and that will eventually cause the prices to fall back to what the market will bear. The party is over, and the hangovers are on the way.

  9. I thought it was time an actual owner caught in the middle of this all chimed in. I purchased a KB home in November 2005 and took title at the end of July 2006. My job was relocated in September and I was forced to put the house on the market.

    I purchased the 4 bedroom, 2.5 bath, 2 story, attached 2 car garage, 2530 sq ft house with over $50,000 in upgrades in the Starr Pass Heights development next to A-Mountain for $300,000 in Nov 2005. Realtor advice was to price it at $375,000 but I decided $349,000 was a better idea. We’re now down to $289,000 and I’m definitely going to lose $30,000+.

    We hold open houses and no one shows up. We get 2 visitors a week, but no offers. We advertise like crazy, but without much response. I don’t know what to do next. Keep it at the insanely low price where I’m losing my shirt and wait for a buyer to come around? Try to find a renter and wait out this downturn (5-10 years?)?

    Any feedback or suggestions would be greatly appreciated.

    Thanks,
    John

  10. Al,

    You are right about the foreclosures and deliquencies yet to come. Right now we don’t know what kind of impact that is going to have on the Tucson Market. All Real Estate is local, a house on one side of a street will sell for a higher price than one on the other side depending on the neighborhood those homes might be in.

    If there are a lot of foreclosures in a neighborhood it will drastically effect the prices of the other homes located near by. But 10 foreclosures in West Tucson won’t effect the prices in East Tucson.

    As to your statement “The speculators are leaving so only the locals will be left to buy”

    First, the speculators all left a year ago Novemeber, I’m glad you called them speculators and not investors like so many have. The speculators are the ones that can really do a lot of damage to a marketplace. They drive prices way up, and sometimes they make money and sometimes they loose a lot, either way, speculators hurt real estate markets.

    Second, only locals left to buy, in a lot of locations that might be true, but not in Tucson, we are a retirement and second home city. Many of the people buying homes are coming from other parts of the country where they sold their home for $700,000 and can buy a home equal to what they had for $400,000 in Tucson. During the next 10 years we are projected to add 33,000 people a year. As a part of that figure many are going to be Boomers either retiring, or buying second homes for the winter and as investments.

  11. If houses are coming down by $100,000 how can a Tucson home be appreciating? It seems to me that they are depreciating. Somebody, please help me with this!

  12. Barry,

    Did you see the graphic on this post? What is coming down is asking price. Sale prices are going up over last year as a whole.

    Houses in general aren’t coming down by $100,000 for sale price. The homes I mention in this post were way over priced by their owners. One of those homes I mentioned was priced $200,000 over what they paid for it a year earlier. Expecting to profit $200,000 on a $300,000 home after one year is unrealistic.

    Certain builders are deeply discounting the price to move them off the books before year end. Some of this is due to speculators walking away from their money down and leaving builders with a lot of unsold inventory.

    This post is about the general trends in the Tucson Housing Market. Specifics on New Construction are different from Resale. One area of Tucson is different from another. Context is very important, if you read this and other post on this blog we try to provide insight into all of these aspects of Tucson real estate.

  13. John,

    You have been caught in the worst case situation for the Tucson housing market. We have enough information to analyze the local market for your home. We will do that in the next couple of day and get in contact with you by email.

    Since it is Christmas eve we are trying to spend time with our family today and tomorrow. I wanted you to know we aren’t blowing you off.

    We will try and help you in any way we can, and we don’t do this for money, we do it because we can. We started this blog to provide information about the Tucson RE Market for buyers and sellers.

    John, have a good Christmas, we will get back to you this week. May next year be better for you and your family.

  14. John,

    We were talking about your situation and went ahead and did the research here are Barbara’s findings.

    “In order to resale your home in a market with huge builder incentives, you have to be priced to compete with the builder. The builder just sold your floorplan with a $60,000 incentive, which put it at $94.86 per square foot!

    I would recommend a lease with the option to buy. This would be more attractive than a straight out rental. I do not know what your mortgage payment is, but rentals are going between $1,100 to $1,400 per month in the Starr Pass Heights neighborhood. I hope this helps.

    Feel free to contact me with any and all questions.”

    John, again have a good day with your family tomorrow.

  15. John,
    I also own a house in the Starr Pass Heights subdivision that I’ve been trying to sell. I haven’t had much activity the past couple of months because it was the worst time of year to try and sell in Tucson. As Dave can expand upon, September to January are only good times to sell single story retirement homes. Your two story single family home will sell, like mine, between February and August when families move to/in Tucson.

    Don’t worry about the lack of activity the last couple of months and don’t drop your prices in order to just take a loss to get out. You were just trying to sell at a bad time of year. Raise your prices back up and wait for the Feb-Aug time frame.

    As a point of reference, my house is priced at $334,900 and I had very little activity until this week when I got an offer for $330,000. As I thought the offer over I read the latest forecast for Tucson. Tucson is forecasted to appreciate 13.5% in 2007! See the report at http://www.arizonataxliens.com/news/arizona-real-estate-2007-forecast.php

    To further support that, this week I read in the paper that they’re going to build homes on Sentinel Peak (A-Mountain) starting at $300,000 and going up to $1 million!!!

    Now I’m thinking about just pulling my house off the market for a year so I can really cash in!

    So, in summary, don’t dispair, you just tried selling at the wrong time. Sell in Feb-Aug or better yet, just wait for the $1 million homes to go in and then sell ;-)

  16. John,

    You made the papers. You are mentioned in the Northwest Explorer article  . Here is a post about it.

    Nanovation is correct about timing to sell your home. I don’t think you can wait a year carrying two mortgages. It does look like values will continue to appreciate in 2007. The appreciation for 2006 was somewhere around 16%.

    But has we said earlier, you are in a worst case situation with the builder offering incentives for new homes that make it impossible for you to compete in the resale market.

    As nanovation says, “don’t dispair”.

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