Tucson Realty


Commercial Real Estate Land Overview 2016

Commercial Real Estate Land Overview

Hank Amos

President and Designated Broker

George H. Amos III

January 28, 2016

Residential (Builder) Land sales will finish the year significantly slower than the past two years. This is due to an anemic economy in Tucson with little to no job growth, a slowdown in retirees moving to Tucson due to a) difficulties in selling their home elsewhere, and b) competition of other communities, including those with lower property taxes as retirees’ fixed income is low because of lower rates of return.  In addition, there is still a perception among many that renting is better than buying.  This is especially true among young adults and those who were foreclosed on during the recession.

Because of this, builders are not buying land at the frenetic pace they did in the mid 2000’s.  That said, new home construction remained pretty solid in 2015 as the Residential Market looks to finish the year higher at around 14,250 homes sold, a 10 percent increase over last year and about $3 billion in sales volume – the first time since 2007 – and a 14 percent increase over 2014.  The median sales price was $170,854, up 3.3 percent over last year.  The average sales price was $209,997, up about 1.5 percent.  New home sales are up 7.5 percent over last year.

As mentioned in our last report, the Northwest remains the strongest and most active submarket.  New home construction permits were up 25.2 percent in Marana, 2.9 percent in Oro Valley and up 15.8 percent in South Pinal County.  Interesting to note, the City of Tucson was down 29 percent and Pima County 15.2 percent.

CoStar reported total land sales (commercial/homebuilders) of $202,000,000.  The top land sale in the northwest was the southwest corner of Naranja Drive and LaCholla Boulevard consisting of 48.59 acres for $5,820,000.  Other notable sales include:  6170 E. Benson Highway (Wilmot & I-10) consisting of 81.29 acres for $4,528,968; 9825 E. Old Vail Road consisting of 28.85 acres for $5,400,000; and, the northwest corner of Twin Buttes Road & La Canada consisting of 78.10 acres for $6,400,000.  Also notable was an 8.45 acre re-development land sale in downtown Tucson at 471 W. Congress for $5,567,500.

Residential lot sales continue to be a buyer’s market at all price levels as the median price of lots has continued its five-month slide to its lowest level in a couple of years at $35,000 in December.  Inventory was at 1,538, up one percent from a year ago.

Trustee sales hit a six-year low in 2015 which has seen continued lower filling annually from a high in 2009.  We are almost at levels seen in the mid-2000’s before the crash.  This will allow re-sale homes to see price appreciation as the drag is lifted.  The investor market for distress residential has slowed, too, as the profit margins have considerably narrowed, so spec buyers are out and more traditional buyers are in.

While the Fed has raised interest rates and the expectations are that there should be more increases in 2016, inflation, doubts could cloud future moves.  This is due to inflation running below the two percent target rate for the past 3½ years.  In addition, oil prices are tumbling and the rise in the dollar pushes down the price of imports.  This downward pressure on inflation would lead one to think that rates may not rise much in 2016.  In fact, because of all the turmoil in the markets, mortgage and lending rates have actually dropped since the Fed increased the rate at its policy board meeting in December.

So what does this all mean for 2016?  Hard to say, as the financial markets may be playing a repeat of2008.  Tucson has still not recovered from that.  Depending on the severity of this correction, I would say that home sales will be more on par with 2014 (maybe not quite at that level) and not 2015, which was a good year.  There is just too much uncertainty out there with little to no growth in Tucson… population or jobs and this black cloud starting to form with these historic new-year lows from the stock market.  China, the world’s biggest economy along with oil, are now in a free fall.  It’s a mess out there and this will dampen home sales.  Because of that, don’t expect builders to be buying tons more dirt for future homes, even though lot inventory is low.  2008 and the pain associated with that still seems like yesterday and fresher now with the current turmoil in the financial markets.


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