Even though it’s the media that brings us our news and, in many ways, shapes opinions, it is the real estate agent in the trenches who knows the intricacies of the real estate market at any particular moment. When a market changes from a buyer’s market to a seller’s, real estate agents are typically the first to know.
This is never truer than in the current Tucson real estate market. Buyer’s agents, with frustrated clients in multiple offer positions, grate at current headlines that claim the bottom of the market is still years away.
The go-to prognosticators that receive all the ink in the media, however, look at a variety of economic conditions when forecasting. So, although the Tucson real estate market is on fire, the unemployment rate continues to rise, the number of new housing permits lag behind those of last year and the so-called foreclosure shadow inventory looms somewhere out there on the horizon.
Since all real estate is local, let’s look at what’s happening in the Tucson housing market and see if we can make some sense of where it will go from here.
Tucson Houses for Sale: A Look at Active Listings
While the market value of a home is based on the sales prices of homes in the area, the number of currently listed homes can tell us two things: whether this is a buyer’s or seller’s market and if prices are likely to rise.
Fewer Tucson homeowners are putting their homes on the market, according to statistics which Cara Mancuso with Long Realty Company in Tucson pulled from her regional MLS database. In June this year, there were 39 percent fewer new listings in Tucson than in June 2011. The inventory of available homes has dropped to a 2.8 month supply, down from 4.4 months of inventory last year at this time. This, taken alone, signifies that home prices may be on the rise.
In July, there were 3,762 homes on the market in Tucson, showing a small decline from June’s number. In May, however, the Tucson market experienced an 11 percent drop in active listings.
Mancuso also mentions that there is strong investor interest in the Tucson area. What this means is that, not only are there fewer houses for buyers to choose from, but when a buyer finds one that’s priced right and in good condition, he or she may end up in a bidding war with a cash-rich investor. The hottest price point right now is in the range of $125,000 to 149,000, so buyers need lots of patience if shopping in that range.
Recent Home Sales in Tucson
July’s numbers show that 1,001 homes sold, with an average sales price of $188,702. Sales are down 21 percent from one year ago and still sit at 50 percent of what they should be in a normal, healthy market.
Recently-released Tucson Association of Realtors® Multiple Listing data shows the average Tucson home price rose 2.8 percent at the end of the first quarter compared to March of last year. June’s price was up 4.6 percent from a year ago.
Now, if you’ve read any news reports on the Tucson housing market, you might be surprised by these statistics. For instance: “… average home prices in the Tucson metropolitan area fell 4.9 percent from 2011 and are expected to keep falling over the next year,” according to a new report quoted in the Arizona Daily Star. The story goes on to say that prices are expected to drop another 3.4 percent by next year.
Different methodology accounts for the contrasting sets of numbers. The report quoted in the Arizona Daily Star utilizes statistics analyzed by the Fiserv Case-Shiller Index that uses a home’s last two sales in its forecasts. The MLS, on the other hand, utilizes the property’s most recent sales price.
About That Bank-Owned Shadow Inventory
“Shadow Inventory” is a term used to describe the inventory of REO (real estate owned) homes that lenders may release to the market. It remains an unknown variable in housing forecasts nationwide. Last month, these homes and short sales made up 41 percent of all homes sold in Tucson.
What real estate experts fear is that lenders have been hanging on to these homes while they worked out kinks in their systems, such as the robo-signing debacle of late 2010. If you recall, this situation came about when it was learned that several large lenders were rubberstamping foreclosure documents without even reading them. Because of this, they were forced to stop all foreclosure proceedings while paperwork was reviewed.
RealtyTrac estimates that 80 percent of June’s 629,000 REO properties have yet to hit the market. Last February it was reported that, nationwide, banks had almost 1,500,000 homes either in their inventory or about to enter it.
How the shadow inventory affects the Tucson market depends on whether all of these homes are dumped at once or whether lenders trickle them onto the market.
The shadow inventory will pump up Tucson’s available housing inventory, putting pressure on home prices and dragging them down. This is good news for homebuyers.
If you’re planning on selling your home, this, the looming capital gains tax hike (for luxury property owners), and the expiration of tax forgiveness on foreclosures should prompt you to get your Tucson house on the market soon.