The housing market in Tucson seems to remain strong with many buyers willing to pay some of the highest prices Tucson has seen in some time.
Average sale prices in are up 6.30% from a year ago in March of 2018. Currently the average Tucson area home is selling for $249,683. We at Oliver Realty contribute this directly due to low inventory levels and limited options for buyers to buy. Even lower interest rates recently are also fueling buyer’s ability to buy at higher prices.
Inventory remains very constrained with only 3.34 months of inventory available. 5397 total homes currently for sale down 12.2% from last March! Oliver Realty expects this number to slowly rise as sellers realize prices are good for selling. The absorption rate which basically the number of homes available for sale divided by the unit sales was also down 17.33%! Which means pricing is going to tighten and continue increasing in Tucson for the foreseeable future. Absorption rate for us at Oliver Realty is the leading indicator when it declines the market tightens and prices increase (basically the market speeds up). If the absorption rate increases that means the market will slow and eventually become sluggish and then if it continues to increase prices will fall. This number is probably the most important number on what will happen to home prices in the immediate future.
So long as the Tucson area real estate market continues to speed up and prices remain on the raise sellers are going to be asking higher and higher prices for homes. Right now sellers should be able to pass on the price increases but for how long? That’s anyone’s best guess at this point. With low rates and low inventory levels I (Michael) think prices in Tucson could continue to increase at a fast rate for the next 6-36 months. However, eventually sellers will overshoot the ability of buyers which is systematic of every big market run up in price.
Areas of concern in the market;
Brand new homes in Tucson are still a concern to us; It seems like builders in many locations especially the higher priced areas like Oro Valley always have several finished homes ready to be bought. This works well for them when the market remains white hot but if it slows even a little bit all of those new homes sitting ready could start to add to many homes at the highest price points turning those areas slightly sluggish until the inventory clears itself.
Another area of concern is that many well priced homes that could use updates are not selling (at least they sit for a while it seems.) The market is in our opinion paying a significant premium for the most up-to -date properties. Obviously nicer better appointed homes are more valuable but some of the price differentials we are seeing are becoming overdone.
What’s hot in the market?
Updated homes; Territorial style homes that have been redone are hot. Homes in neighborhoods that were built 20-30 years ago and have high ceilings and large spaces completely updated allow buyers to get premium locations and finishes and these homes are selling quickly.
Smaller single story homes that snowbirds can buy and live in during winter remain red hot. Newer, up to date ones move fast and get high prices. If you have one of these and want to sell I think you can price on the high side of the market and usually get it.
Affordable homes; anything under $150k that’s at all decent is gone within hours of being listed. Homes priced under $250k on the NW side of town is much the same story. If you are looking to buy in these price ranges find a decent house and be prepared to pay up for it.
If you have questions about the Tucson area real estate market contact us and we will be happy to go over more of what we think is going on. -Michael