Since soaring to spectacular heights several years ago, home prices in Tucson have fallen like a rock thrown into the Grand Canyon.
The question now is: When will they stop dropping?
“I think we’re close to the bottom,” suggests housing researcher John Strobeck, owner of Bright Future Business Consultants. “They may drop a little bit more.”
Strobeck adds that a rapid rebound in prices is not necessarily imminent.
Citing the upcoming expiration of some questionable financing techniques used during the housing boom, Strobeck isn’t predicting a return to normal home prices until 2014. “But my crystal ball isn’t always perfect,” he admits.
Greg Hollman, of Coldwell Banker Residential Brokerage, is currently the president of the Multiple Listing Service (MLS) for the Tucson Association of Realtors. He agrees with Strobeck, and says Tucson is “skating along the bottom right now” in home prices.
Figures provided by the MLS show how much local single-family home prices rose before falling off.
In 2004, average home prices started to skyrocket, climbing from $219,000 to $304,000 in 2007. But then reality struck, and average prices began to tumble, declining to $262,000 in 2008, $216,000 in 2009, and $206,000 in 2010. This year, the average so far is around $188,000.
Those averages vary widely depending on where a home is located. Last year, the average selling price of a three-bedroom house in the northeast part of Tucson was more than $272,000, while a home with the same number of bedrooms on the southwest side sold for $107,000.
That bell-shaped curve is reinforced by statistics on housing square-footage costs published by the national real-estate research company Zillow. For metropolitan Tucson, cost-per-square-foot figures provided by Zillow show median prices—the point at which half of all prices are higher, and half of all prices are lower.
This median cost rose steadily, from $78 in 2000 to $102 in 2004; by 2006, it reached an astonishing $149. Then the decline began, and the square-footage price has fallen for five consecutive years, to $100 by February of this year.
One factor in the sharp decline of home prices is the growing number of foreclosed homes.
“The housing market has been given a shock,” Strobeck observes, stating the median price of foreclosed homes is now less than $95,000. “When you can buy a 1,400- to 1,500-square-foot home for that price, that’s a real shock (to the market).”
Strobeck also notes that foreclosures constitute around 40 percent of total home sales now.
“The good news about foreclosures is those homes are being purchased at a pretty quick rate,” Hollman says.
As a result, Hollman anticipates that the number of foreclosed homes on the market may dwindle by next year—but that will depend upon how many more of these homes are released onto the market by the banks that own them.
Bob Zachmeier, of Win3 Realty, has seen a shift in where foreclosures are occurring in Tucson. During the early portion of the housing bust, he says, he saw the city’s southside hit hardest. “Those areas were pummeled, but now they’re starting to rebound,” he says.
“A buyer can pay $325 per month for a two-bedroom home,” Zachmeier says about mortgages for some of the homes in this area. “Why rent at those prices?”
On the other hand, Zachmeier is now seeing more foreclosures in the foothills. “That area is far from bottoming out,” he suggests.
Zachmeier perceives another geographic shift in home buying trends: “We’re not seeing a pickup in outlying areas, but around the UA, it is.”
He predicts: “The housing rebound will start in the central part of Tucson and spread from there.”
Zachmeier believes recent sales figures show another split in Tucson’s housing situation: For lower-priced homes, he thinks the market has returned and may even be tipping toward a sellers’ advantage.
“Those selling for less than $100,000 are flying off the market,” Zachmeier says. Because of the poor economy and rising inflation, he sees many people downsizing—and thus driving up the demand for lower-priced homes.
The higher a current home price gets, the pace of sales begins to taper off, with the tipping point being around $120,000.
At the top end of the market, it’s a completely different story. “There were 191 houses listed last month at more than $1 million,” Zachmeier says, “and five sold. We’ve seen a lot more recovery at the low end of the market.
For his part, Strobeck hopes lenders have learned the hard lessons of the nation’s recent real-estate bust.
“We’re going to see a different market,” Strobeck says of home-buying in the future. He believes down payments as high as 20 percent may become requirements, and he thinks huge mortgage-application fees will be common.
“If that occurs,” Strobeck says, “new ways will have to be found to get people into homes. Taking a cue from the auto industry, that may include the leasing of homes.”
This article appears in May 5-11, 2011.
At one time, the news about even lower Tuscon housing prices would have been wonderful. My husband and I have made several trips to southern AZ to look at real estate. We’ve looked in Cochise, Pinal, Maricopa, and Pima counties. We’re the lucky retired government employees who have a house in the DC area that’s paid for, savings to pay cash for our future retirement home, great health insurance and pensions. We started subscribing to the AZ Daily Star and Tucson Weekly to get a feel for the politics, social, and financial issues of the area. Thanks to the national TV stations and newspapers, we’ve gotten the feel. We’ve come to the conclusion that Tuscon isn’t a good fit for us. Since Tuscon is in Pima County, we are eliminating the whole county for our real estate search. I think of the saying, “as you sow, so shall you reap.” I agree totally with Tucson and Pima County’s desire to secede from AZ. You really should be annexed to Mexico.
Yes, it’s Tuscon to me, not Tucson.
The proposal for Tucson (my old home town) to secede from Arizona is to form Baja Arizona, a new part of the United States, NOT a part of Mexico! The oligarchy … the fascists … who presently dominate Arizona politics from Maricopa County may be a better fit for you Sharon Lin? You know, those are the politicians who will cut your great health insurance and pensions in favor of tax cuts for their corporate masters.
Back to Tucson housing prices: I worked as a real estate agent for over 30 years and also worked as a real estate appraiser for the past 20 years with some overlap in those decades. My father developed Desert Palms Park on Tucson’s eastside back in the early 1960s.
Mr Strobeck says he hopes lenders have learned the hard lessons of the recent bust. They have NOT. Lenders are still telling appraisers they have to appraise houses at requested values, when there is no objective support from market data. This is a continuation of lenders’ appraisal policies from before and during the build up to the crash.
For example, during one of the last appraisals I completed for mortgage lending purposes a FNMA underwriter told me that I could not adjust the sale prices of comparable houses for price changes over time. In other words, when prices began to plummet at ~2% per month at the beginning of the crash, that underwriter instructed me to ignore that market characteristic. I refused. The lender’s underwriter had another appraiser who followed those illegal instructions complete a 2nd report that became the basis for a loan.
Another example, a loan officer told me that unless I appraised a house at a value that was 30% over market value, he would make sure I never received another assignment from any mortgage lender. I used the “F” word in responding to him.
Most appraisers did not refuse to lie about values, because just about every single lender insisted that appraisers report values to make deals close to generate money for lenders. The lenders sold those loans on the secondary market and did not have to field the high financial risk. Most appraisers followed the type of instruction that I refused. As a result, I shifted my appraisal practice to estate, trust and litigation appraising, a niche that includes a large number of clients who want real values.
Lenders today still insist that appraisers lie about values. That has not changed. Aggravating the pervasive tendency for appraisers to comply with client requests for ficticious reports is the complete lack of effective enforcement of appraisal law by the Arizona Board of Appraisal, which has been and continues to be a totally dysfunctional state agency. Appraisers who have been turned in numerous times for egregious violations are still appraising without modifying their how-much-do-you-need appraisal policies.
As to the Tucson Board of Realtors opinion about the position of the Tucson housing market: A year or two into the crash, the Realtors’ president said prices were at the bottom and it was a great time to buy. Since that statement prices declined by ~30%. The current president says Tucson’s housing market is skating along the bottom right now. I’ve heard that repeated every year since the beginning of the decline.
Given the large number of houses for sale overall, the upcoming foreclosures, the lack of employment and the political climate that drives new business away from Arizona, the housing market has a long ways to go before house prices start to level off. The article quotes Strobeck as saying “normal” prices won’t happen until 2014.
What in the hell is “normal”, if Strobeck actually said that? Is “normal” back to peak prices?
There is a chance that prices will level off in 2014, but as of March 2011, two months ago … when I analyzed a portion of the Tucson housing market data ….., prices were still declining in the submarket I was working in, which was horse properties in Tucson’s NE, E and SE districts.
It is NOT a time to buy a house. It is a time to rent, Sharon. Keep your cash for at least a couple more years. You may want to follow Glenn Beck’s advice and buy gold instead of another house.
Ah, yes, I remember you, the govt. retirees who posted several times.
It isn’t just Pima county, all of the state is just about the same.
AZ was previously always known for one thing, a big hole called the Grand Canyon. Now it is known for right-wing nut crazies, gateway from Mexico, hellish seven month summers, loonie government, senseless murders, plundering of taxpayers’ money on idiotic schemes. .
But some people fit right in to all this. For that reason, AZ will continue for awhile to be sought after, especially by retirees who have not gotten the word. And real estate is cheap! And probably the cost of living too compared to other states. And Canadians may be too far away to get the word. And Mexicans may pour into to AZ when Mexico is finally totally dedicated to providing drugs to USA. Others will gamble another state will make total fool of itself and negative attention will shift away from AZ. And a Tucson cashier at Trader Joe’s will know your name when you roar up on your Harley.
If I were retiring, I would retire to Canada and spend the winters in the South of France. Have friends who do that and they love it.
Good luck wherever you settle. But remember this entire country seems to be in sheep-like decline right now so lower your expectations or get very involved and vocal trying to make things better. Unless you are a right-wing nut in which case that would make things even worse.
My husband and I moved from the DC area to Tucson about 7 years ago and have never once regretted that decision. Arizona is a great place to live and work — the weather is awesome and the people are among the friendliest we’ve ever seen.
After a career pricing, developing and negotiating multi-million/billion dollar defense and IT contracts, I decided to apply that experience and knowledge to real estate. I have worked with many clients who chose Tucson as the best place to live either full time or part of the year. No matter what their political affiliations are — every singled one of them is happy with their decision and their new home!
Patsy Sable
Long Realty Company
patsysable.com