Tucson Housing Market

1
Tucson Housing Market

• Prepared for Tucson Association of Realtors
• By William P. Patton, PhD

2
Overview

• Following a wild boom, the Tucson housing market
  is slowing to more normal levels
• What factors caused the boom?
• When will the housing market come back into
  balance?

3
Tucson Housing Market Conditions
4
Housing Slowdown or Bust?

• Residential building permits are down
• Homes unit sales down
• MLS listing inventories are up
• Housing market dollar sales volume plunged
• Number of days on the market have increased
• New listings have spiked
• Home prices are stable to falling

5
Tucson Building Permits
Forecast
6
Tucson Median Sales Price
7
Tucson Average Sales Price
8
Tucson Real Median Home Price Annual Percent
Change
9
Residential Unit Sales
10
Tucson Dollar Sales Volume
11
Tucson Total Listings Under Contract
12
Tucson New Listings
13
Tucson Active Listings
14
Tucson Average Days on Market
15
Months of Supply on Market(MLS Listings/Unit
Sales)
16
Factors Impacting the Current Housing Market
Imbalance
17
Resale Market Supply/Demand Factors
18
3 Stages in Housing Correction

• Denial
• Sellers hold on, hoping to get their price
• Inventories soar
• Acceptance
• Sellers lower price or stay where they are
• Cancel contract on new home
• Consolidation
• Inventories retreat, prices stabilize
• Housing valued as shelter, not investment

19
Strategies for Dealing with the Tucson Real
Estate Market

• Avoid the no urgency/no motivation trap
• Educate sellers
• Develop marketing plan for price
• Understand price vs. time on market tradeoff
• Provide good economic information
• Educate buyers
• Emphasize supply availability
• Look for deals but dont wait for major price
  breaks or lower interest rates

20
Why Will the Tucson Housing Market Stabilize?
21
Mortgage Interest Rates Have Stabilized
8.52 May 2000
5.23 June 2003
22
Economic Outlook is Healthy

• Population growth slowing but still high level
• Employment, wages and income growth are slowing
  but still solid
• Expect below-trend economic growth in 07-08

23
Tucson Economic Outlook 2006 2008

• 2006 2007 2008
• Nonfarm Jobs 3.9 2.3 1.4
• Population 3.0 2.5 2.3
• Retail Sales 7.5 3.8 4.0
• RB Sales 9.9 5.5 5.6
• Personal Income 8.6 6.7 5.9
• Housing Permits -24.5 -10.0 14.6
• Wage per Worker 5.0 3.7 3.6

24
Tucson Population

• Pima County population exceeds 1 million
• Population in Pima County is growing 2X faster
  than US population
• Pima County continues to have strong net
  in-migration from other regions
• In 2006 net migration into Tucson was 24,000
• Net migration amounted to 82 of Pima County
  population growth in 2006

25
Tucson Home Sales as a Percent of Population
26
Tucson is Not Overpriced Compared to the Outside
Market
27
Home Price Gain Has Not Outpaced Some Other
Markets

• 2Q06 1Q06 5-year ann. rate
  ann. rate cumul.
• Los Angeles 9.1 17.8 136.0
• San Diego 0.6 2.7 104.3
• Las Vegas 2.3 15.3 106.6
• PHX 12.1 16.9 100.6
• Tucson 13.7 11.5 86.3
• Albuquerque 22.3 13.2 49.7
• Denver 2.8 -0.9 19.3
• Dallas 2.5 5.1 17.4
• Austin 12.9 6.3 17.4

28
Pima County Net Migration Balance by Top and
Bottom States
29
Tucsons Comparative Home Price is Competitive in
Major Markets for In-migrants
30
Conclusions

• Housing market correction will continue well into
  2007
• The long-term market fundamentals continue to
  favor the Tucson real estate market
• There are currently a lot of active listings in
  the market
• Good for buyers (good selection _at_ stable prices)
• Good for realtors who hustle