Bob Solfisburg, Land Specialist at Tucson Realty & Trust Co., gives Tucson Real Estate Market Overview for Land
In 2013, the Housing Market posted healthy gains in both resale and new homes. The median price of a resale was near $168,000 which is up roughly 10 percent from last year. Housing inventories remain low with only a four-month supply and foreclosures hit a five-year low firming up resale home prices. U.S. interest rates should remain favorable for housing as GDP growth is expected to be a sluggish 2½ percent growth.
New building permits issued in 2013 were 11 percent ahead of last year, estimated at 1,600 permits. The median sales price for new homes increased 8 percent to nearly $245,000. The northwest submarket represents over 60 percent of all new building permit activity encompassing Pima County’s largest submarket stretching from Tangerine/I-10 to Oracle Road. Gladden Farms, Dove Mountain and Rancho Vistoso are the most active master-planned communities and will continue to dominate through 2014.
Finished lot sales ranged between $28,000 per lot in the southwest submarket up to over $65,000 per lot in Oro Valley. Based upon median sales of new homes ($245,000), builders will be challenged to deliver product in this price range factoring the new minimum wage and increases in building materials.
The real gains in the housing market came in the first half of 2013 with lower than expected second half results. What happened? When U.S. treasuries spiked in August pushing long-term rates higher, homebuyer traffic fell instantly followed by a national drop in mortgage applications. The rate hike proved to be temporary and slowly reversed itself toward the end of September but, no doubt, local homebuilders became cautious starting the third quarter holding plenty of spec inventory. In addition, home sales showed weakness unable to match the previous year’s monthly sales. The result – local homebuilders sharpened their pencils and hit the pause button on land acquisitions to closely monitor these trends.
In 2013, total volume of land sales transactions increased by roughly 11 percent lead by homebuilders. The most notable land sales reported were Phoenix developer Sunbelt Holdings acquisition of La Estancia, 480 acres near I-10/Kolb Rd., and Maracay Homes purchase of 120 acres with Rancho Vistoso at $22,000,000. The level of distressed land deals has diminished due to acquisitions from investors, developers and homebuilders.
The Commercial Land Market is driven by the single-tenant user. This includes convenience stores, charter schools, pharmacies and churches. Land sales prices range between $5.00 and $11.00 per-square-foot. The higher vacancies in Retail, Industrial and Office have left commercial land sales below normal levels for these areas. In addition, tighter lending policies and difficulty obtaining market appraisals has limited these opportunities.
In 2014, new housing opportunities will open in the southeast submarket. The northwest will lead the market offering a balance for first-time homebuyers and the active adult market. Builders are seeing more specs on the market right now than over past seasons. The time to sell is Now!