TUCSON, Arizona —  On Wednesday, November 1, the Land Advisors Organization and Bright Future Real Estate Research will be holding their annual Land and Housing Forecast.  The roster of speakers includes Will White (Land Advisors Organization), Ginger Kneup (Bright Future Real Estate Research), Walter Richter (Southwest Gas), Keri Silvyn (Silvyn & Bangs), Greg Abrams (Pulte Homes), Jeff Grobstein (Meritage Homes), and Jeff Nielsen (Toll Brothers).

The theme of the event is ‘Finding Balance’, which is appropriate considering the growing divide between Tucson’s inevitable growth and the ability to provide inventory to ready, willing, and able consumers.  The discussion will provide an overview on the current state of our real estate environment, how we got here, what the implications of this current state of imbalance are, and – most importantly – what we can do to better position Tucson for the future.

Will White commented, “We are looking forward to the event again this year on November 1st at the Ritz Carlton. Every time we put it on we learn something new about the market here. Whether it is my talk on land , Ginger’s on housing, or the great homebuilder panel discussions, there always seems to be new information coming out. This year’ event is called “Finding Balance” and I think it is very appropriate at this point in Tucson’s housing market progression. We will really dig into the supply and demand situation in Tucson and work to explain how we got here and what the future holds for our market”

This event is typically attended by a ‘who’s who’ of the Tucson real estate community, and is unique in that all net proceeds from the event are contributed to Big Brothers Big Sisters of Tucson.  A great event benefitting a great cause; how can you go wrong with that?

The specifics of the event are as follows:

DATE:             Wednesday, November 1, 2017
TIME:              2:30 Registration, 3:00 Program, 5:00 Networking Reception
LOCATION:      Ritz-Carlton Dove Mountain
COST:             $75 per person
REGISTER:      www.landadvisors.com/events

Part 1 of 2: ‘Supply and Demand’ Challenges Facing Stakeholders

Land Advisors Organization, Will White of Tucson and Bright Future Real Estate Research’s, Ginger Kneup were the hosts and keynote speakers of the 2014 Tucson Land and Housing Forecast Meeting held September 25 at the Ritz-Carlton at Dove Mountain. Proceeds from this ‘sold out’ event were to benefit Big Brothers / Big Sisters of Tucson.

White addressed the supply side and Kneup the demand side of the Tucson land and housing market.

“Tucson is a bit of an anomaly,” according to White, “we’re steadier in growth than Phoenix, and there isn’t the competition between home builders as found in other markets. Tucson is one of the very few markets where the number of home builders is actually growing. The issue facing us is whether there will be a proactive plan for supply of lots or will we be reactive without a plan for lot shortages.”

“With less than 3,000 finished lots remaining with home builders in 79 active subdivisions in the region, and 50 of these, or 63% have about 1-year of inventory,” White told attendees. “We’re getting to a place we have not seen before, where a lot shortage is imminent if the region is not active in 2015 to get about 2,000 lots into production then we face a major traffic jam in 2016 when the absorption really starts to pick up.”

White says, “We’ve revised our 5-year projections to get to 3,500 permits by 2018. Basically we are striving to get back to 1991 levels in the next 5-years which is hard to believe. However, even at this conservative level we need to deliver approximately 11,000 finished lots in the next 60-months. If permits make a run like they did in the 1990’s then it is even more critical and difficult to catch up.”

Both keynote speakers, White and Kneup, agree that 2016 becomes a pivotal year in the supply and demand equation.

Coming off a high of nearly 12,000 permits issued in 2005, an all-time high for Tucson, to where the market bottomed out in 2011, with fewer than 1,500 permits pulled, the current cycle mirrors the early 1990s without the steady annual increases in an upward path.

Kneup explained, “There was a sharp run up in permits through mid-year 2012 when demand appeared to be returning and recovery seemed in high gear. Then permit volume modestly improved through the first-half of 2013, but dropped dramatically again a year ago. Two things happened at that time, the first, a general weakening in demand as consumer confidence lagged and unemployment continued to drag, people began to see the overall economy was not really improving. Secondly, lot availability in the high demand areas began to thin, so consumers were offered fewer choices until new finished lots could be delivered. That lot delivery occurred late last year and early this year.”

“Something that is not so obvious is the change in perspective over the past 25 years. In 1990, few people could look forward 15 years and envision a market of 12,000 permits. In 2014, we look backward 10 years and feel disappointment since our perspective has changed, and we now know the potential our market holds. On a positive note, we have recovered volumes over that of 2009, so we can say that 2014 will be our best in six years,” said Kneup.

“In fact, there simply aren’t as many people purchasing homes as had been anticipated due in part to a changing profile of the home buyer and the market. The opportunity for real volume lies in affordability.”

In Tucson, that means more new home product offered within the price gap.

“In the last 12 months,” Kneup said, “nearly 700 people bought a new home priced between $160,000 and $236,000; however, 3,600 home buyers bought a resale in this price range. Said differently, for every one buyer that chose a new home in that price range in the past 12 months, five buyers chose a resale.”

There’s a close relationship between the median sale price for new and resale homes, to where a price gap exists between the new home median of $236,000 and the resale median of $160,000, or a price gap of $76,000. When the median resale price on resale homes dipped back 4.1% in August to $163,000, it has put the median resale price within 1.6% of a year ago, and the price gap between new and resale is essentially unchanged from a year ago.

So, a home buyer must be willing to pay a 50% premium to purchase a new home in Tucson. This price gap, or premium, represents a major challenge to the growth of new home market share. In fact, there is a known correlation between the premium one is willing to pay for a new home versus the market share that new homes are able to capture. Traditionally, that premium has been 25%-30% for the buyer.

In the Phoenix metro area this price gap is much higher, over $100,000 according to RL Brown Reports.

Part II Tomorrow: Answers from the Prestigious Panel of Land Experts – Ryan Huffman, VP of Land Acquisition and Development, Mattamy Homes’ Arizona Division; David Mehl, Owner and President, Cottonwood Properties; Michael Iles-Cremieux, Regional VP of Land Acquisitions, Meritage Homes; Sean Walters, Chief Operating Officer, Sunbelt Holdings; and Taber Anderson, Principal, Chief Investment Officer, True Life Communities.