By: Aaron Mendenhall, Chapman Lindsey Commercial Real Estate Services in Tucson
The once quiet submarket is getting ready for multiple new communities
January and February permit levels were low to start out 2015 which caused some concern in the market. The quarter ended with 467 permits pulled, thanks to a strong March with 195 permits. While the 467 permits were the fewest pulled since Q1 2012, they are not all of the story. The lower permit counts to start the year were to be expected with the increased permits pulled in the City of Tucson in Q4 as builders took advantage of the impact fee moratorium. Each of the municipalities except Tucson and Pima County were above their 2014 permits in Q1.
While permits were down, sales were up for builders. The sales numbers reported to SAHBA by participating builders showed net sales of 161, 140, and 174 for January, February and March respectively. Each of these were higher monthly sales numbers than every month in 2014 except for March which had 163 net sales. Most builders we have spoken to are reporting even stronger sales to date in April. We hope this momentum caries through the summer.
As part of our lot inventory, we track when builders start construction on existing lots. Construction follows permits and typically follows sales, although spec homes will be started prior to sales. Most of the communities throughout the Tucson Metro area have been averaging less than two starts per month. Only 7 communities averaged more than 3 per month. When analyzing the communities with the most starts in Q1 it was evident that the NW submarket was the most active. However it was the communities with the smaller, lower priced homes that had the most activity. DR Horton started 24 homes at The Pines in Q1. The San Lucas community was a hot spot as LGI Homes started 18 homes and Richmond started 15 homes. Further north in Red Rock, Pulte started 15 homes. DR Horton started 11 homes on its smallest product line in Saguaro Bloom (19 across all 3 product lines). Outside the NW submarket DR Horton started 11 homes in Mission Antigua in the SW and KB Home started 11 home in La Cima Esplendora in the SE submarket. These top 7 communities contributed 105 of the 317 SFR home starts in Q1 (33%).
While the Northwest continues its dominance in community counts, permits pulled and home starts, the Northeast submarket is poised to make a small but important presence in the market. Long seen as a quiet, established submarket with little new home activity other than individual lot sales and custom or semi-custom homes being built, there are now multiple communities coming online.
In 2013 AF Sterling purchased Tanque Verde Village, a platted 10 lot subdivision. They opened for sales in 2014 and have one lot left to sell. Their homes have been closing at prices in the $400,000 to $500,000 range.
Sandwiched between the Foothills and the NE submarket, Maracay Homes purchased Deseo at Sabino Canyon all platted lots at the end of 2012. They have enjoyed strong sales and have closed homes in the $400,000 to $600,000 range.
These successes have caused both of these builders to find additional inventory in the NE submarket and have others looking for opportunities. AF Sterling purchased a 15 lot platted subdivision on Bear Canyon and Snyder roads. The lots are nearly finished and a model is being completed. They will be selling homes starting in the low $400s. Maracay also wants to continue their success at Deseo at Sabino Canyon and have some property tied up in the NE area that they plan to entitle and develop.
In September 2014 Pulte Homes purchased a 49 lot community on the north side of Tanque Verde Road just east of Houghton Road called Desert Willow. This will be a gated community with lots around 20,000 square feet. Pulte should open for sales later this year.
In addition to these more traditional communities, Rancho Soldados is a 100 lot gated, acre+ custom home community that is opening up in the area as well. Homes here are targeted to be in the million dollar range. This gives a range of homes and prices for prospective home owners in the area.
Although the NE is not as deep of a market as the NW in regards to population, there are similarities that should result in strong sales. Like the NW, the typical homeowner is more affluent than average and the existing homes are aging. Existing home owners want to stay in the area but there have not been any significant new home options for home buyers to choose from until recently. We are looking forward to seeing this submarket thrive.
To learn more contact Daniel Feig at 520.747.4000 x103 or danf@chapmanlindsey.com Aaron Mendenhall can be reached at 520.747.4000 x102 or aaronm@chapmanlindsey.com
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