1650 E. River Road
Tucson’s Pent-up Demand
Will it start to show soon? I have been talking with many buyers who are starting to think about purchasing but are still very concerned about what the market is doing and only want to buy “at the bottom”. Don’t we all? But, here’s the point. There are a great many potential buyers in the current marketplace. In normal market conditions, they would buy a home due to real needs: larger family size, relocation to Tucson, or care of a loved one requiring additional room or a different configuration of home. These buyers would be in the marketplace and buying homes, but due to the very unknown state of the Tucson real estate market, these buyers are trying to delay the purchase and wait for what they perceive as a bottom of the market. Now all these people cannot or will not wait that long. If you live in a 1100 sq ft home that you bought 4 years ago when you got married and now you have a couple of kids and another on the way, its difficult to wait around for the market to bottom (assuming you can afford a larger home). This is what is called “pent-up demand”. It’s essentially people who have a need or a real desire to make a purchase but are putting it off for as long as possible. These people are still going to buy but as time goes on, the pressure mounts for them to take action. What I feel will happen is that as soon as there is a hint that our real estate market has the worst behind it, this pent-up demand will show itself, and I imagine we in the industry will see a rally in the Tucson market.
The amount of this pent-up demand is impossible to determine. It will only be evident once the perception of the market becomes a little better and the sales levels begin to dramatically increase. As always, housing is a basic need that everyone must satisfy. In a growing market like Tucson’s (estimates show over 25,000 people move to Tucson a year), the pent-up demand could be considerable. The population growth alone that Tucson experiences (2%-3% per year) should keep the real estate downturns much shorter than in areas where there is substantial population loss and where a healthy real estate climate may never come back (i.e., Detroit, Cleveland). In Tucson, population growth is projected for the next 25 years and will guarantee that the real estate market here stays healthy, and, most likely, above the appreciation levels of most of the other areas around the country.