TUCSON, ARIZONA, April 20, 2023 -- The question on the minds of buyers these days is, "Will we ever see affordable housing again in Tucson"? The housing price gains we’ve seen since the start of the pandemic in early-2020 seem prices detached from the long-run trend.
But there are several reasons for this unprecedented pricing increase.
Here's a snapshot of the current housing market:
- Prices are about as unaffordable as ever from a monthly payment perspective.
- Housing supply remains constrained because few people want to move out of their 3% mortgage to buy into a new 7% mortgage.
- Because supply is so constrained, and so many millennials want to buy a house, demand exceeds supply.
- So, prices should be falling more, but the demographics of household formation are essentially putting a floor under prices.
Zonda has a new research report that answers these questions with new housing.
According to the Zonda report, demand for housing in the Tucson MSA has improved over the last few months, with price discovery and incentives playing key roles. Builders offering favorable incentives and reduced prices are experiencing an uptick in sales activity. Additionally, it appears there is consumer acceptance of the new mortgage interest rate environment, which is bringing buyers off the sidelines; Lower mortgage interest rates and mortgage interest rate incentives are creating an atmosphere of more affordable housing options. Builders will play a vital role in the recovery process, particularly those focusing on finding the market from a monthly payment standpoint.
Strengths
Despite short-term headwinds, Tucson remains more affordable than its neighbor Phoenix and should continue to benefit from migration patterns and affordability. In addition, a stable workforce could mitigate the risk of significant job loss in the event of a recession.
Weaknesses
Supply levels are rising, which could negatively impact home prices moving forward. Despite moderating mortgage interest rates, affordability remains a challenge. The disconnect between incomes and expenses is pricing would-be buyers out of the market.