The Tucson-area’s residential housing market showed mixed but overall positive indicators in September, with a 20-month low for new building permits and a slight dip in new home closings, but continued shrinkage in foreclosure sales and increases in median sale prices.
The market is in recovery, if a slow one, said Ginger Kneup of Sahuarita-based Bright Future Real Estate Research.
She predicts that the year will end with 15 to 18 percent more permits and about 20 percent more closings over last year. The volumes will still be low in a historical context, but an improvement nonetheless.
New single-family home permits hit a nadir last month with 126 issued, the lowest since January of 2012 and in contrast to a 2013-high of 286 in March and the 189 that could have been expected following the average rate over the last 12 months.
Some of this is seasonal. Kneup said buyers typically try to close in July to move before the school year starts, slowing down sales in August and thus, new-home permitting in September. Plus, there’s a “more than reasonable” supply of spec homes—by definition, already permitted—available in the area.
The greatest activity is in the Northwest, followed by the Southwest and Vail areas.
David Godlewski, president of the Southern Arizona Home Builders Association, said September’s permit numbers were disappointing and a little surprising.
“I’m not surprised that September was down from June, July and August but I was certainly surprised by how much. I’m expecting October, November and December to be better,” even with some seasonal adjustment.
Godlewski said he’s heard homebuilders say the region isn’t creating high quality, well-paying jobs needed to sustain the recovery of the real estate market, both resale and new home construction. He said that’s not solely responsible for the September slide, but he thinks it has something to do with it.
Permits are generally going in the right direction though, which is encouraging, even if they’re not where they need to or should be, he said.
“Obviously, it’s not going to get back (like) into those peak years in ‘04, ‘05 and ‘06 but we need to see an increase even more so over where we are,” he said.
New homes are selling for about 7 percent more than they did a year ago, though. Godlewski said he expects a continual, if not significant increase, but it’s a positive, and now, the market just needs buyers who can get into the homes.
The picture seems steadier on the resale front, especially with a shift in the amount of foreclosures. Although foreclosures still represent about one-in-five resales, foreclosure sales have fallen nearly 20 percent between 2012 and 2013 year to date.
Kneup said home prices have increased about 7.2 percent with foreclosures included, and 10.6 percent without the foreclosures. For median prices, that means a climb from about $144,600 to $155,000, and $151,000 to $167,000, respectively.
Foreclosure sales need to continue to drop, Kneup said, but with stabilization in median sales prices, “the stranglehold (the) foreclosure market has had over the last few years is finally, finally weakening on price.”
Cathy Erchull, president of the Tucson Association of Realtors Board of Directors, said stabilization has been showing across the board for months.
Foreclosure notices are not only going down but the foreclosed homes on the market are now selling for more, she noted. Bright Future’s data shows some up-and-down price tags but an overall climb over the last couple of years, with the median foreclosure selling for about $87,500 in January 2012 to $125,200 last month. As they become fewer in number, their prices go up as the market will bear, Erchull said.
With foreclosures still a major part of the market, she’s looking at the blended, 7 percent sale price climb- and that kind of growth does not indicate the swelling of another bubble, she said. And the roughly three-to-five month inventory is more like that of a neutral market.
Unless something drastic changes, she said, the market is moving upward in recovery.
“We haven’t really seen a lot of fluctuation and if we’ve seen any fluctuation it’s been a little bit upward. So that’s always a positive for the marketplace because we are starting to see movement but we’re seeing it in kind of more of a normal market, not really a buyer’s market or a seller’s market.”
Contact reporter Hillary Davis at email@example.com or (520) 295-4254.