By: Will White of Land Advisors Organization in Tucson
reprinted from the original in The TAR Scorecard, January 2015
The Tucson land market has very exciting times ahead. Although 2014 was more challenging than anticipated, there were two strong takeaways: SFR permits were higher than 2013 and homebuilder land acquisition remained strong.
There was a tremendous amount of land purchased by builders in 2012 and 2013 in anticipation of a strong selling season into 2014. When this did not materialize, builders essentially took the year off. These start/stop mini cycles are occurring within a basic macro-buying cycle.
A strong positive not to be overlooked are the three large builders that entered our market with land purchases in 2014: LGI Homes, Mattamy Homes, and Toll Brothers. Despite a challenging environment, these builders identified Tucson as a market with enough promise to start up operations.
Tucson’s tight lot and housing supply has kept the metro area consistent and prepped for a busy time ahead. We are predicting a very active 24 months ahead due to three factors:
- 60% of all active subdivisions are projected to be sold out by the end of 2015. The urgency to resupply will become high into 2016.
- Extremely limited lot/land supply vs. continued large demand by new home builders and larger market shares by top local builders.
- Ongoing challenges and delays in rezoning parcels in Pima County. This places an emphasis on lots ready for construction.
Land acquisition has become very reactive instead of its historic proactive approach. As the market heats up and new home sales paces are better, the builders become more aggressive. If it slows as in 2014, they hit the brakes. This creates the mini-cycles that we have. The issues with this irregularity are that it causes a large traffic jam and can push land prices higher in a blink of an eye. Also, we have not seen land prices decrease because of the new builder acquisitions and the limited supply in the best areas.
Areas to watch in 2015 will be north Marana and the Vail/I-10 corridor. These areas have limited lot supply and new amenities such as retail and employment.
Builders began targeting most of the shovel - ready inventory in these submarkets prior to the end of 2014. We anticipate that each builder will need to purchase one or two new projects in the next 12 months. This is approximately 12 - 14 lot deals in the Tucson metro area.
Unfortunately there is only half that number of opportunities that are truly “shovel ready”. In order to have finished lots and homes available for 2016, we believe homebuilders will place a huge emphasis on “ready-now” inventory.
Largest homebuilder land deals of 2014
- $13.6M: Mattamy Homes at Rancho Vistoso (140 gross acres)
- $8.7M: Mattamy Homes at Dove Mountain (172 platted lots)
- $5.99M: Toll Brothers at Dove Mountain (72 platted lots)
To learn more Will White can be reached at Land Advisors Organization by email at [email protected] or call him at 520.514.7454
For the complete TAR Scorecard and other housing trends CLICK HERE.
Editor's Note: The Commerce Department reported Wednesday that US Home Construction rebounded in December, helping to push activity for the entire year to the highest level since the peak of the housing boom nine years ago. Builders started construction at a seasonally adjusted annual rate of 1.09 million in December, an increase of 4.4% from November when unusually severe weather pushed activity down 4.5%. For all of 2014, builders started construction on 1.01 million new homes and apartments, an increase of 8.8% from 2013. It was the first time construction has topped 1 million since the height of the housing boom in 2005.