Builder sales continue to drop nationwide

New construction housing starts were down again nationwide during the month of August, at their lowest point since 1991.

The Commerce Department reported that new home starts were down 6.2% from July, and down 33% from the previous year. New homes sales have slowed quite a bit in the Tucson area as well. When comparing local new homes sales to the previous year, inventory homes aren't selling like they have in the past. Within the last six months only 65 new construction "spec" homes have sold in NW Tucson, compared to 248 "spec" homes that sold during the same period last year. A friend of mine who works as a Pulte sales rep told me that she has not sold a home all summer. She's usually very upbeat and positive but I can tell she's really concerned about the market and where it's heading. The builder continues to lower their home prices, hoping to draw in more buyers. Unfortunately the buyers just aren't coming in. As we move into the busy season for Tucson real estate, everyone's hoping that the low prices and high inventory will get our housing market moving.

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Housing starts continue to drop; Tucson home builders

The Commerce Department reported Tuesday that housing starts nationally plummeted almost 11% in July to it's lowest pace in 17 years. Construction of single-family homes in July fell 2.9% to a pace of 641,000, lowest since January 1991. Many home builders in Tucson are struggling as they continue to drop home prices that are being impacted by high resale inventory and surging foreclosures and short sales.

In Oro Valley there are quite a few home builders that are trying desperately to sell off their remaining home sites, spec homes and models. All of these builders have dropped their prices significantly since the communities first opened around 2005. One of Tucson's biggest builders, Pulte, has dropped the base prices drastically in their high end development of Sienna; prices are about $100K less then they were in 2006. Homes that once started at $642K are now starting at $542K, and some of their spec homes have recently old for almost $200K less then the original 2006 prices. This particular community is not yet built out and is already seeing a number of short sales, which are impacting surrounding property values.

Nicholas homes is another builder that's really struggling in Oro Valley. The Stonefield community still has almost half their home sites available and their base prices have dropped about 17% since December 2005. Home prices that once started in the mid $300K's are now starting around $276K. I drove through this community last week and noticed how run down and unkempt the model's exteriors looked. Weeds and landscape were out of control which made the homes looked like they'd been abandoned. One of the models is currently on the market for $449K. Considering the base price of this home is now $339K, it better have some incredible upgrades to warrant this price.

High fuel prices are impacting home builders located outside Tucson as buyers avoid developments that require a long drive time. Several Tucson builders are lowering prices to "lure" buyers that would might otherwise avoid their communities due to distance from amenities. New construction home sites as well as resale homes continue to sit in Red Rock and Vail because buyers don't want to drive so far outside the city.

Until Tucson home builders can sell off some of the existing inventory their "giving away" our resale market will continue to remain sluggish. Once we can eliminate the builder spec inventory that's available buyers should begin focusing on resale homes; this should help reduce our resale inventory and help to stabilize the market.

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Low appraisal affects builders home price

Some clients of mine closed on a new construction spec home last week in Oro Valley and they ended getting quite a deal. Just 24 hours prior to close the builder had to adjust the sales price due to a lower then expected appraisal. The builder was really scrambling at the last minute, trying to get a new, higher appraisal for the sales price, but it just wasn't going to happen.


I haven't encountered this before, a builder's sales price coming in below appraisal. The reason it did, in our case, was that there are two short sales in the community. These "pre foreclosures" have dropped their prices so low that they're impacting property values around them. Great for new buyers, but bad for those already living in the community and trying to sell at the much higher price they paid two years ago. We're seeing foreclosures in every corner of Tucson, at every price range. The neighborhood my clients bought in isn't even three years old and it's not yet built out. It's going to be interesting to see how the financial struggles will impact the sales prices of the rest of the homes that are yet to be built.

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Sluggish Tucson housing market means great home builder incentives

Recently I've been working a lot with clients interested in new construction, and it's amazing to see the impact that the sluggish housing market is having on local home builders.


The Commerce Department on Thursday reported that in 2007 new construction was down 25% from the previous year. That's the biggest drop in 27 years. In December alone construction fell by over 14% nationwide. As I've visited various new home sites in Tucson, it's easy to see the local impact. Many big name builders are laying off employees left and right, or consolidating home site offices to save money. On several occasions I've found that new builder home sites are cutting back the days and hours they're open to save money.

I've also noticed that several builders are desperate to sell. Certain areas in Tucson will always be stronger price wise, and certain builders aren't as flexible with pricing as others, but in certain areas there are great deals to be found. This week I've visited Rancho Sahuarita and found some incredible incentives with several builders. One builder site in particular is offering prices about $100K lower then what they were in 2005. For those of you that aren't familiar with Rancho Sahuarita, it's a master planned community about 20 minutes South of Tucson. It's really a great little community with tree lined streets, several clubhouses, pools, a huge fitness center and lots of other amenities. At one time the community felt somewhat isolated, but the addition of several new retail sites has helped the area tremendously. Home prices in Rancho Sahuarita tend to be lower then Tucson because of it's distance from the city. It's a straight shot North on I-19 into Tucson, so for those that work in Central, South or West Tucson, Rancho Sahuarita is pretty convenient location to live. The area is now saturated with homes for sale; the slow housing market has increased inventory and availability in Tucson so fewer people are considering Sahuarita.

As we all know, when the real estate market is hot, people will buy homes every and anywhere they can find them. When the market slows and there's a bigger inventory, areas that may be a little more isolated begin to struggle. That's when we see the great incentives and deals to draw buyers in.

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New Home Builders See Sales Drop in Tucson and Nationwide

More news on the national housing market made front page news in USA Today. New construction homes saw a sales decrease of 8.3% nationwide from July to August. New home builders are slashing prices and encouraging buyers to take advantage of the many incentives that are being offered.

For more on the story visit USA Today

In Tucson we are seeing some great home builder incentives and price cuts. One client of mine was actually contacted by the builder he is already under contract with and notified that they are reducing lot premiums and will be adjusting his purchase price for his home.

The Tucson real estate sales stats for September will be out in early October. I'll be counting down the minutes.....

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