Bob Solfisburg, Land Specialist
Residential Land sales have slowed significantly thus far when compared to the past two years. The Northwest region dominated the overall land sales in Pima County reporting nearly $20 million for both residential and commercial land sales. New home construction remained solid in the first half of 2016 as the resale market showed improved traffic and higher closings. Over the past two years, first-half sales activity has been consistent, but pulling back slightly each time in the second quarter. No hangover this year as second quarter 2016 new home sales are up approximately 12 percent over the same period a year ago. The median price of new home sales is $256,000 and the median resale market is much softer at $165,000. It should be noted this is the highest spread on record between resale and new construction.
The Northwest remains the strongest and most active submarket. This region represents the largest inventory of developed lots. The active adult communities continue to impress with solid gains. Del Webb, Meritage and Maracay Homes are leaders in this sector. Mattamy Homes and Toll Brothers have joined this select group of national homebuilders targeting the 55+ retirement market.
Residential Lot prices range between $900.00/Front Foot up to $1,200/Front Foot. The Southwest region represents the lower range, Sahuarita and Vail sectors are near the middle and the Northwest region pushes toward the upper range. The Eastside and Vail truly lack adequate supply of lots to keep pace with current demands. Fully developed lot inventories remain tight as builders face pressure from higher impact fees and increases in development costs are putting the squeeze on affordable land acquisitions for new construction.
Single-family foreclosures experienced a significant decline in the first-quarter, reporting only 17 percent of total resales while the same period last year was nearly 21 percent. These distressed sales remain too high, but shrinking foreclosures suggest progress in the resale home prices which stimulates new home sales. Investor market for distressed residential has slowed as margins are too low, risks are higher; thus, squeezing buyers seeking deals of less than $100,000.
The forecast for remaining 2015 is caution with little urgency in the homebuilder market. It appears the national and world stages are the center of attention noting the trading of global currencies is extremely active. There has been discussion of raising interest rates which signals confidence in market recovery for USA. Yields have been artificially compressed for years through quantitative easing. USA, Europe and Japan have been battling deflation through quantitative easing with hopes of gaining inflation.
Raising interest rates may be exactly what the doctor ordered to create homebuyer urgency in the market. The Fed discussion of raising rates has kept buyers in the market through the second quarter and this truly is apparent in both resale and new home sales.
The Rental Market boom is showing signs of over-supply as job growth in Tucson has under-performed. This sector is very competitive as lease-up periods are longer and incentives for the newer properties are common. This fall Pima County faces the much needed $850 Million 10-year Bond Election. It’s divided into several propositions so voters can choose between fixing streets to raising salaries. Voters have skepticism and doubt with history of Rio Nuevo and Pima County acquisitions of open space and more soccer fields. Pima County residents need to consider all the consequences if not approved as this truly is “Hope and Change” for our future.