The Tucson-area real estate market has slowed down this year because of the rise in interest rates. But it is continuing to thrive despite higher rates and an increase in home prices, market observers say.
Jodi Koch, president of the Tucson Association of Realtors, said higher interest rates limits the number of homebuyers. However, she said, high-end houses continue to receive great offers.
“We are seeing homes stay on the market a little bit longer, and we’re even seeing some home price reductions,” Koch said.
Realtor.com reports that Tucson is still ranked as one of the top hottest real estate markets this year. Volume is expected to grow by14.2%, while home prices are expected to increase by 8%.
Jeff Rohde, an author in the area of real estate, finance, investment and general business sectors, wrote an article on the Tucson-area real estate market in June. Among his findings were:
• The median price of a single family Tucson home has increased 17.9% year over year.
• The current median price is $385,000, the Tucson Associate of Realtors reports.
• Home inventory is low and many first-time homebuyers are opting to rent.
• Homes are selling for 101% of the listing price, with new homes seeing an increase of 3.5% year after year.
• Number of days on the market has increased to 17, compared to 13 at this time last year.
• The supply of single-family home inventory is one month, compared to 0.8 months at this time last year.
• Rita Ranch, Civano and Flowing Wells are among the most popular neighborhoods in Tucson.
• Sam Hughes is the most expensive with a median home listing price of $597,500. The most affordable neighborhood is Julia Keen. Homes there have a median listing price of $220,000.
The cost of renting is up as well, Rohde’s report found. The median price for a single-family home is $1,895 (in May). That’s an increase of 4.4% over last year. And 4.7% of households are occupied by renters, according to Zumper, a rental service.
With the fed’s rate increase, 30-year home loans are averaging about 5.6%, as of July 6. That’s a big jump from rates averaging 3% or above during the COVID-19 pandemic.
As an example of what that means for a homebuyer, Koch offered this:
Last year, if you bought a home for $400,000 at an interest rate of 3%, your payment would be $1,686 for principle and interest. This year, with the same house is listed at $480,000 and an interest rate of 5.75%, payments will be $2,786 a month.
Koch, who has worked in real estate for 23 years, said cash buyers from out of state continue to move to the Tucson area, which drives up home prices even more.
Tucson’s real estate market remains a seller’s market for homes in certain price ranges, Koch said. But sellers, in general, are not going to be receiving 20 offers and are probably going to have to reduce their price.
Buyers, Koch points out, are seeing more opportunities to purchase a home this year.
“Last year at this time we only could show a buyer one house every few days,” Koch said. “Today, if a buyer calls me, I might have 10 homes to show him. Good ones priced right and in great condition are going to sell. Others are staying on the market.”
Building permits issued by the city of Tucson increased in May of this year compared to last year: 831 compared to 741. The number of permits issued for new single-family homes rose a bit, from 73 to 85.
Home building is still suffering from supply chain issues, Koch said. A new home build formerly averaged six to eight months and is now averaging one year to complete.
Pima County continues to have a home shortage, Koch said. “I hope builders will continue and find a way to build homes in a price range for essential workers, otherwise we will lose them.”
Such homes, she said, need to be in the $250,000 to $350,000 range. “That is the range we’re lacking. We really need more of that,” she said.
What will the Tucson real estate market look like in 2023. Koch said that depends on what the fed does with interest rates. “I would like to see it say below 6 and settle at 5.5. That would give it stability,” she said.
As for home buyers and sellers, Koch recommends vetting a Realtor well.
“It’s one of their biggest investment in their life and to trust someone they haven’t vetted is just crazy to me,” she said.
