As most of us know, the real estate market has been chaotic, and Tucson has been at the center of the crazy demand. With Tucson’s market being hot and seller-friendly, many wonder if we will see any relief from the constant battle to purchase a home.
Current State Of The Market
Homes are currently selling for their list price or more as demand continues to outpace the supply of houses. As of March 2022, the median listing price for homes in Tucson was $344,500, compared to March 2021, when the median list price was $285,900.
Homes are spending less time on the market than last year, but only slightly. In March, the average time on the market was 42 days. In March of 2021, this number was 45 days.
Currently, the inventory is at an all-time low, with only 869 single-family homes available in March 2022. This number was a 6.3% decrease year-over-year. This decrease in availability is likely to keep the bidding wars going on available properties and makes it harder to find a home to purchase.
There are still housing shortages in the Tucson area. New home construction is beginning to pick back up from the supply and labor shortages they’ve faced, but the effects are still apparent. Tucson home builders are working to meet demand, but homes are purchased as soon as they’re complete.
The cost of brand new homes in Tucson has increased by at least 18% compared to last year; certain home types increased by over 30% in some areas. The delays caused by supply and labor shortages are still causing problems in new construction.
Of course, the delays aren’t stopping new construction from being offered. As of this writing, data from different online platforms and new home builders shows that over 70 communities are marketing new homes for sale in the Tucson area.
Because people continue to move to Tucson, the need for new construction continues to grow. Hopefully, home builders will soon see some relief in their supplies, though there aren’t any signs pointing to that relief coming soon.
What Is Causing The Home Shortage?
While the most prevalent cause of home shortages has been the effects of Covid-19 on the economy, Tucson was already experiencing supply shortages before Covid hit in 2020. So, when Covid hit, it caused an even more significant deficiency in the booming housing market.
Another cause for the shortage involves home builders. Builders are still recovering from supply chain issues, which delay their ability to finish homes and make them way more expensive to build than pre-Covid. These issues put pressure on builders to deliver more homes. With fewer new builds available, more people are looking at existing homes.
The third major issue with the inventory shortage involves investors. The increase in real estate prices, history of good performance, and lack of other investment options make real estate an attractive investment.
It’s normal for about ten percent of single-family homes to be purchased by investors. These homes are then usually turned into rental properties for an extended period. However, in Tucson, the number of single-family homes sold to investors is between 20% and 30%, which has decreased the number of available homes.
As mentioned earlier, the amount of homes available is way lower than we’ve ever seen. Before Covid hit, Tucson saw about 2,000 homes on the real estate market at any given time. This amount is still relatively low, but today, less than a month’s worth of houses are on the market.
Current Market Forecasts
These conditions make it challenging to get a good idea of what forecasters expect going into 2023. In 2021, many forecasters predicted the real estate market would cool down this year. However, by the first couple of months of the year, many were backtracking on that opinion.
While Fannie Mae initially expected housing prices to only raise 7.9% in 2022, they backtracked and are now forecasting an 11.2% increase by December of 2022.
The increase in prices is less than last year, but it can hardly be seen as a relief for potential homebuyers.
What about 2023? Mortgage rates have started climbing after hitting historic lows, so many forecasters believe this will decrease demand and help normalize prices.
Fannie Mae only projected a 4.2% increase in home prices in 2023. Of course, with how 2022 has gone so far, you may need to wait to see if they keep their opinion the same.
The housing market continues to be dominated by sellers, though it is beginning to cool down. While we’re starting to see the market improve post-Covid, the repercussions of supply chain issues are still being seen, especially in the new construction market.
Because of this, demand is higher than it should be for existing houses. As home builders bring more communities online throughout 2022, inventory should increase.
If planning to sell, know that mortgage rates are beginning to rise, leading to fewer people buying homes. Homebuyers want to lock in rates now before they increase. Now is likely a good time to sell if you’re considering moving.
If you’re looking to buy, expect competition. With new construction, supply issues remain, and builders are behind on deliveries. Many home builders have stopped allowing homebuyer customizations, which will enable them to build homes quickly.
In 2022, expect prices to rise, though the price increases should not be as dramatic as in the last couple of years. No matter your position, it’s essential to stay informed on the state of the market to make educated decisions when it comes to home buying and selling.