New Home building permits up 39% in Metro Tucson for March

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Analysts say home building permits were up 39 percent last month in the Tucson metro region, and they expect growth to continue this year. Homebuilders are reporting March to be their best month since 2008 for single family home permits and signs of strong sales.

New home permits rose to 271 in March, up from 206 in February and 143 in January 2016, totaling 620 permits for the quarter, the strongest the region has seen since 2008

According to Ginger Kneup, publisher of the Orange Report, “There have been only two months in the last few years that had volumes in the 280s, but permitting in both instances was artificially higher as builders pulled permits speculatively in advance of fee changes. The permit activity of March offers some real hope in terms of demand as it appears to be in response to new sales.”

Kneup continues, “There was a 15% drop in the stock of inventory homes which would suggest that permitting was demand driven last month. Furthermore, only one community that was not yet started selling pulled permits (La Estancia by Meritage), indicating that seeding of inventory homes was not a relevant factor in the March surge.”

Nearly 80% of the permit activity (213 homes) occurred in the single family production inventory. “March Active adult permitting dropped to a 12% share and custom home activity fell to a 10%. 2016 has been the most positive and least volatile quarter of the last 15 months,” according to the Orange Report.

In Q1 2016, the market issued one new home permit for every 6.3 resale homes sold – a leading indicator to suggest about a 2%+ increase in new home market share.

Will White of Land Advisors Organization commented, “We are seeing great news from homebuilders regarding the 2016 selling season so far. Let’s not forget that adding fuel to the fire is that homebuilders have significantly increased their market share goals in Tucson. Securing a multi-year land pipeline to carry out those larger business plans has proven to be difficult.”

DR Horton pulled a total of 57 permits in March, followed by Pulte / Del Webb with 35 permits. Richmond American pulled 31 permits las month in nine communities while Meritage was fourth with its 26 permits supported largely by its newest communities at La Estancia (14) and The Estate at Capella (7). Maracay Homes closed out the top five homebuilder permit volume list with 24 permits in March.

White says, “The land and lot supply shortage will accelerate as the numbers perform over and above expectations. All indications are it is going to get very busy on the land side here. Not really a question of ‘if’ just ‘when’.  There is no ‘off’ button on the land machine, it is always churning. The faster it goes, the faster it needs to be replaced.”

New home closings were also up 21 percent in March from 152 in 2015 to 193 for 2016. This from a 26 percent increase a month prior.

A significant land sales in March included the 173-acres of undeveloped land purchased by Mattamy Homes from the City of Tucson for development in the southeast Tucson submarket, across from Civano masterplan community.

White sees the problem coming soon to the Tucson market will be a shortage of entitled lots. As the sales and permits stay strong, there will become an urgency to getting lots prepped for 2017 and there remains only a few spots in town for homebuilders to do that in time for 2017 inventory purchases.

This trend is predicted to continue as more buyers choose new.