Burned by toxic home loans that ruined their credit, foreclosed-upon residents are driving an epic shift in the region's housing market. For the first time since 1986, building permits for multi-family projects in 2012 will outnumber traditional single-family homes.
"At least 43,000 Tucson-area residents have a bad taste of home ownership. They have been foreclosed on, thrown out of their homes, had to move or had their financial situation ruined. They do not want to go through that again and do not consider home ownership a good investment," said John Strobeck, owner of Bright Future Business Consultants. "They want a product that is more worry-free."
The construction of those worry-free homes could number 2,000, according to Jim Marian, partner in Chapman Lindsey Commercial Real Estate. About 30 percent of the new units will be for student housing "and that will not meet the market demand out there."
Last year, apartment developers bought over $8 million of land. The largest deal was $4.15 million to develop 206 units at the District, 248 E. Fifth St. near the University of Arizona, Marian said.
The second-biggest purchase was by HSL Properties for $3.8 million in Marana's Dove Mountain. The company plans to build 272 units there on 20 acres.
In contrast, only 1,500 detached, single-family new home permits are projected for 2012, said Strobeck.
Both real estate experts made their predictions before 200 attendees at Strobeck's 15th Annual Housing Market Review, Analysis & Forecast Jan. 27 at the Westin La Paloma Resort. They were joined by Marshall Vest, economist at the University of Arizona.
The builders, developers and investors at the forum were told they will struggle for market share if they are still offering traditional single-family homes.
"Competition to the normal housing product is here now," Strobeck said.
In 2011, construction permits were issued for 880 rental homes. Four builders are active in this market: MC Companies, Centro Nuevo, Miramonte Homes and HSL Properties.
Building permits for single-family homes totaled 1,438, the lowest since 1967. New home sales reached just 1,260.
"That is a pretty crummy year. No, to be honest, it's a terrible year," Strobeck said.
D.R. Horton Homes had the most closings during the year at 227, followed by Robson Communities at 157. Rounding out the top five were Richmond American Homes at 156 sales, Pulte at 146 and Lennar at 136.
Although foreclosures continue to wrack the market, the experts see that trend starting to turn. By the fourth quarter this year, most of the remaining high-risk, five-year adjustable rate mortgages will have reset.
At that point, new foreclosures should dip to a relative trickle. For the entire year, 6,000 to 8,000 new notices are feasible compared to 9,433 in 2011.
"We have just suffered through the longest and deepest recession and also the weakest recovery since the Great Depression. There is some good news, the economy actually is moving in the right direction once again," said Vest.
Last year, work to fix up foreclosures and repossessions helped the Tucson economy recover 900 lost jobs in construction. Most of those repairs were done by specialized trades such as electricians and plumbers.
However, the Tucson area lost 30,000 jobs overall during the recession. Vest said full job recovery will not occur until 2015.
This year looks to be one of modest recovery. Strobeck's "micro-growth" forecast calls for 1,500 new home permits in 2012 and 1,550 in 2013.
More significantly, he estimated some 18,000 people are waiting to put their homes on the market once prices start to climb. Likewise, banks and private investors are holding their discount foreclosures while they wait for economic nirvana.
Strobeck concluded that those factors could impact the housing market through 2018.
Contact reporter Roger Yohem at firstname.lastname@example.org or (520) 295-4254.