Q3 2015 Tucson Land Update

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28 Oct Q3 2015 Tucson Land Update

Lennar - Eagles Rest

Top: Golden Barrel – Mattamy / Above: Eagle’s Rest – Lennar

Tangerine Corridor Shift

Builders are shifting their focus east to Oro Valley

The Tucson housing market continues to move along at a steady pace, finished lot inventories continue to drop, but both builders and investors are purchasing more land at an increasing rate. So far in this year land transaction counts have increased from 7 in Q1 to 13 in Q2 to 19 in Q3. The combined values of these transactions have also been increasing significantly: $10.1 million in Q1, $26.7 million in Q2 and $66.6 million in Q3. (DR Horton purchased the balance of Saguaro Bloom for $42 million in September)

Although we are currently 43 permits behind where we were last year at this time, both the second and third quarter permit counts are higher than their respective quarters in 2014. The first quarter dip this year, due in large part to the large number of permits pulled in Tucson at the end of 2014, is what is keeping us behind last year’s pace.

Housing starts show an even stronger trend. There were 424 new homes started in Q3 2015 which was the highest number of 3rd quarter starts since 2009. Q2’s 461 starts was also the highest number of starts for that quarter since 2009. The increasing number of new homes in Tucson is positive news. However, finished lot inventories continue to decline asbuilders are starting new homes faster than new lots are being developed. In Q3 there were 210 new finished lots added to existing communities. This is the fewest number of new finished lots in a quarter in two years. This trend is about to change.

There are currently 10 communities under construction throughout Tucson; 6 in the NW, 3 in the NE and 1 in the SE. When completed these will introduce nearly 900 new SFR lots, and at least 360 could be completed the last quarter of 2015.

As has been the trend in recent years, the Northwest submarket has been the most active in land sales, development and home sales. Other the Northeast and Foothills, it is also has the highest home prices. Since the beginning of 2013 there have been approximately 4,120 new SFR homes closed in the Tucson area. Of those 2,100 (51%) were in the NW submarket. The NW average new SFR home sale price YTD in 2015 is $278,902 which is more than $14,000 higher than the overall Tucson area average of $264,729. The average price per square foot in the NW is approximately $122 vs. $115 per square foot for the Tucson Metro area. (this does not include custom home sales)

Within the Northwest submarket, the Tangerine Corridor has been the crown jewel with the Dove Mountain area leading the way. Since January 2013 there have been approximately 844 traditional SFR homes sales in the corridor with an average sale price of $343,586 which is $64,684 higher than the NW submarket average. Within the corridor, Dove Mountain area communities have been selling over 60% of the homes with average prices only slightly higher than in Oro Valley.

The focus on Dove Mountain is evident in the 520 new SFR lots developed in the area in the past three years. Toll Brothers and Mattamy Homes both entered the Tucson market here with 72 and 172 lot communities respectively. This base of inventory will help Dove Mountain continue on for several years. However, the only lots currently being developed in the area is a new 7 lot subdivision of 3.3+ acres lots by Cornerstone Homes. There are very few existing platted communities available in the Dove Mountain area that are immediately developable – Sonoran Preserve being one of the few. There are future blocks within Dove Mountain and there are several projects in various stages of planning in the immediate area but are running up against various development issues as well as the typical time required for zoning and entitlements.

Oro Valley introduced only 145 new SFR lots since 2013. However there are several projects that have been in the making for some time and are coming out of the ground. There are currently four active development projects that will yield 548 SFR lots within the next year including Maracay’s CenterPointe at Vistoso, Lennar’s Eagle’s Rest, Insight’s La Canada Ridge and Meritage’s Estates at Capella. Mattamy also has purchased land in Rancho Vistoso and is finalizing its plats and hopes to start breaking ground soon on more than 300 lots.

The Tangerine Corridor is still the place builders wish to be with its strong sales and high home values, but it appears Oro Valley is becoming the new focus of attention. We look forward to many new communities here and throughout the Tucson market in the upcoming years.

Please contact us for additional insight and information.

construction map

Locations of subdivisions currently under construction

Maracay CtrPt

CenterPointe at Vistoso – Maracay

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2015 Residential Land Transactions

2015 Q3 land sales

Sales data from Real Estate Daily News / RED Comps

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Market Overview

Lot Supply

The finished lot supply was reduced by 214 lots in Q3 with a total finished lot count of 3,206. There were 210 new finished lots in four existing communities added to the market in Q3: 33 lots in Madera Highlands (Meritage); 44 lots in Mountain Vail (KB Home); 64 lots in San Lucas (LGI Homes) and 69 lots in Sycamore Vista (DR Horton). During Q3 there was a total reduction of 424 finished lots, 37 fewer than in Q2 but 47 more than Q3 of 2014 and the largest 3rd Quarter reduction since 2009.

There are currently 10 communities (894 SFR lots) under construction throughout Tucson. Of these 360 lots or more could be completed in Q4 2015 and unlike Q3 when all new lots were added to existing communites, the majority of new lots coming online in Q4 will be in new communities.

There are approximately 72 active SFR communities in the Tucson Metro area. Six communities were built out during the quarter with most still selling remaining specs: 5 in the NW and 1 in the SE submarket. As many as eight more communities could build out in Q4 2015 based on recent building trends. .

Lot Supply Statistics

Q3 ’15 vs. Q3 ’14 vs. Q3 ’13

Finished Lots: 3,206 3,697 3,756
New Lots Added: 210 263 396
Total New Lots Added – prior 12 mo: 954 1,377 780
Total Quarter Permits * 544 538 534

(Permit data from Bright Future Real Estate Research, LLC)

SFR Community Statistics as of September 30, 2015:

72 active traditional SFR communities
6 communities were built-out or closed in Q3 (most still selling specs)
4 communities added finished lots in Q3
No new communities were opened
10 communities under construction (894 lots / up to 360 could be finished in Q4)
up to 5 new communities could be added in Q4
19 residential land transactions in Q3 2015 totaling over $66.62 million
7 raw land or platted lot transactions including one $42 million transaction
4 rolling options in 4 communities
6 investor land transactions (3 vacant land, 3 platted lot)
2 finished lot transactions in Q3

Lot Ownership

During Q3 2015 investor inventory was unchanged. Builders added 210 new lots to existing communities on land already owned.

Builder controlled lots: 2,367 (73.8%)
Investor controlled lots: 839 (26.2%)

Investor Ownership Q3 2015:

43.5% Far South submarket (255 lots)
28.5% Northwest submarket (367 lots)
21.7% Southeast submarket (177 lots)
7.8% Southwest submarket ( 40 lots)

PV School Yard

The School Yard – Pepper-Viner

La Estancia

La Estancia – Meritage / Sunbelt

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Forecast

There were 544 permits pulled in Q3 2015. While 78 permits fewer than last quater, this is the best Q3 permit number since 2012. Both Q2 and Q3 of 2015 have been better than 2014, but our low permit counts from Q1 are keeping the yearly total 43 permits behind last year’s count at this time.

The power communities of the past few quarters that boasted the highest housing starts, including Saguaro Bloom, The Pines, Sierra Morado and La Cima Esplendora remained strong, but not at the same levels. The good news is that other communities around Tucson increased starts. We anticipate the multiple communities currently under construction to add significant starts as they come online.

Based on current building trends, as many as 8 communities could build out in Q4. Most, if not all of the new lots that will be introduced in Q4 will be in new communities rather than just adding to existing communities. This should help stabilize the active community count. Based on revised numbers and activity, we anticipate matching or possibly a slight drop in permits in 2015 from 2014. However, based on the number and location of new communities coming online soon, we anticipate a stronger 2016.

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Maracay NE

Ranches at Santa Catalina – Maracay

Maracay Territory

Territory at Santa Catalina – Maracay

Our lot supply numbers represent only traditional SFR lots. We do not track multi-family, active-adult, or custom lots. Our definition of a ‘finished’ lot is one that is fully improved and a building permit can be pulled. Lots are no longer considered available once trenching has been initiated. Sales do not affect our counts – only starts. Builder lots include all lots under their control, including options.

We currently do not include platted lots in our inventory or ownership counts. However, there is an increasing amount of activity from both builders and investors in acquiring raw and entitled land in the Tucson area. We do track them and will include them in our counts as they are developed.

Investor lots include investors, developers and other non-builders.

* Permit data from Bright Future Real Estate Research, LLC

Sales comp data from Real Estate Daily News Comps (realestatedaily-news.com)

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About Our Company

CHAPMAN LINDSEY Commercial Real Estate Services, L.L.C. was formed in 1991 by successful real estate professionals who wanted to better serve their clients. As a full service commercial real estate company, CHAPMAN LINDSEY offers brokerage and leasing services with an emphasis in vacant land sales. CHAPMAN LINDSEY’s three partners combine over 76 years of commercial real estate experience to provide a focus of expertise in the areas of land, investment properties, property
leasing, acquisition and deposition services, and tenant representation.

The company is an active member of the Southern Arizona CCIM (Certified Commercial Investment Member) Chapter and the Tucson Association of Realtors.

Dan Feig and Aaron Mendenhall specialize in the sale of land and developed lots to investors, developers and home builders in Pima County.

Highlights

CHAPMAN LINDSEY has closed over $600 million in transactions.
CHAPMAN LINDSEY has also closed over $125 million in land alone in the past 6 years.
CHAPMAN LINDSEY has exclusively represented the following home builders with the purchase or sale of their own land/excess inventory;

Cornerstone Homes, DR Horton Homes, Ducati Homes, KB Home, Lennar Homes, LGI Homes, Maracay Homes, Meritage Homes, Milestone Homes, Miramonte Homes, Pepper-Viner Homes, Richmond American Homes, Standard Pacific Homes and TJ Bednar Homes

If you are looking to buy or sell land, please contact us to discuss how we can put our expertise to work for you.

Daniel Feig / 520-747-4000 x103

danf@chapmanlindsey.com

Aaron Mendenhall / 520-747-4000 x102

aaronm@chapmanlindsey.com

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