July 12th, 2016 by Michael Oliver
We have been seeing an a lot of demand this year as buyers feel confident about buying Tucson area homes. Low mortgage rates and a competitive landscape seem to be speeding up the velocity of the marketplace. This has been the case for about the last 6 months in the Tucson area. Many buyers are getting beat out on the best homes and the next time they find one they like they are currently willing to step up and make really good offers out of the gate. I have seen recently buyers willing to pay full price or more on their initial offer just to lock up a house…
A direct effect of this market action is that sellers are also stepping up and trying to push the price as high as possible. Sellers are wanting to sell and I have heard stories of the same seller wanting to list at $325k coming back to their agent right before it comes on the market listing the home at $350k…. It has been a long, long time since sellers were this confident in the market. Currently ONLY homes that offer high quality/ amenities will get away with this as the market is exceptional for those properties right now. The other properties/ sellers that try this will eventually have to drop price and probably end up with slightly less then they would have otherwise gotten had they priced correctly from the start. This occurs due to a heard mentality buyers share when they are looking for properties in the same market. Meaning that buyers in the market that sense a home is not getting much interest from others will always offer much less for that home then they would otherwise offer if they saw a lot of other buyers looking at it or sensing that others maybe interested in it. So if you want to get the most for your home make it highly desirable and get a lot of interest… (effective marketing does this extremely well.)
What does this mean for the Tucson real estate market going forward?
Obviously I have no crystal ball, but the market is strong and interest rates keep dropping allowing buyers to have more ammo in their budget. I think the updated high quality homes will continue to sell briskly; inner NW side (Casas Adobes, 85737 zip, 85742 zip, 85741, 43, and 41) are all highly demanded right now! Catalina Foothills (85718, 85750 zips) same story. Brand new and newer homes (built after 2005) in all of the other areas of town also are seeing huge demand currently. Those areas and homes types are selling the best and should continue to do so. The other homes that are not newer or highly upgraded and updated that sellers overprice will sit and have to be reduced in some case many times to find a buyer. (Look at the “just reduced” homes and you will see this as the common theme.)
Looking out over the next 6 months I think the market continues to see heavy demand and prices going up in some cases very quickly. Past that I don’t know, but as long as interest rates stay around 3% for a 30 year fixed (where we are today) the market has no option but to stay hot; simply put homes in the Tucson region are under priced in relation the monthly mortgage payments. High quality homes can be bought for $1500-$2500/ month in all parts of the city. Compare that to other larger cities with world class weather and it is incredibly cheap.
What happens if rates go up?
This is the main concern of those educated on the market. the Tucson real estate market is used to sub 4% rates, take those away and make them 6% or 7% (for whatever reason) and the market will fall in price (f the rate increase happens dramatically anyway). I just don’t think the market could handle a quick rate increase without prices coming down significantly. The good news is mortgage rates increasing looks to be one of the least worried about ideas in the market and if the current trends continue sub 3% mortgages are just around the corner. So barring a jump in mortgage rates or a signifiant slowdown in the economy the Tucson housing market looks to remain very active with more demand then homes available.
Let us know if you have questions or would like our opinion on your home/ home purchase.