August 4, 2009—Positive sign: Home sales inventories fall to under 6 months’ supply

By Joe Pangburn

INSIDE TUCSON BUSINESS

August 4, 2009

In what may be one of the most positive signs yet that the Tucson residential real estate market is poised for recovery, Long Realty Research Center data shows inventories of homes priced under $250,000 have fallen below six months’ worth.

“Months of inventory is the best matrix to look at when you’re trying to see the temperature of a specific area or price point,” said Kevin Kaplan, vice president of marketing and technology. “Obviously it is the lower price points that are bringing in buyers from foreclosures and sellers lowering the asking price on their homes.”

Nevertheless, he said, a healthy and balanced market is considered to have around six months of inventory at a given time. The market as a whole has around 5.7 months of inventory on sale, down from the 8.4 months at this time a year ago, according to Long’s data.

The fastest movers are homes priced under $175,000 where there is 3.6 months of inventory based on June’s sales levels. Homes priced from $175,000 to $249,999 have 5.4 months of inventory.

Above the $300,000 price point, the inventory numbers climb. There’s a 7.5-month supply of homes in the $300,000 to $400,000 range, 11 months supply of homes priced $400,000 to $500,000, a 17.2-month inventory of homes in the $500,000 to $749,999 range; and two years’ supply of homes priced $750,000 to $999,999.

Kaplan said Tucson is experiencing a significant increase in buyer activity, with new properties under contract in June up 57 percent over June 2008.

“We’ve really gotten to a more balanced healthy level with active to sold,” Kaplan said. “Some markets even look a little overheated. It will take another few months to see if there gets to be an equilibrium and prices come up some to curb the high demand.”

The higher demand Kaplan is referring to is mostly centralized in the southwest, southeast and central/east area of the region.

A data analysis of the first half of the year show homes listed in zip codes 85706, 85756, 85710, 85711, 85730, 85741, 85746, 85747 and 85757 have the highest percentage sales to total active listings, according to data from Tucson Association of Realtors.

The top three zip codes with the highest percentage of listings sold are 85757 on the southwest side at 40.2 percent (31 sold of 77 active listings), 85711 in midtown generally between Alvernon Way and Wilmot Road at 36 percent (48 sold of 133 active), and 85746 on the southwest side at 31.2 percent (59 sold of 189 active).

Those same zip codes also have some of the lowest numbers for inventory — just 2.4 months supply in 85757, three months in 85711 and 3.3 months in 85746, according to Long’s data.

Southeast side zip code 85706 also has a low inventory supply of 2.8 months, though percentage of homes (88 of 292 active listings) meant percentage of sales was just over 30 percent.

“That south side of town has had a bit more of a price decline and probably has a higher foreclosure mix,” Kaplan said. “We’ve seen huge increases in sales units there.”

Louis Parrish, associate broker with Keller Williams Tucson Territory Realty, agrees.

“You would probably find that the higher percentage groups are also areas that have had the highest percentage of depreciation, highest rates of foreclosure and highest rates of short sale listings. When those neighborhoods are totally stabilized, the rest of our markets’ current stabilization trends should accelerate.”

Hotel Congress Plaza

Hotel Congress downtown is in the midst of making a plaza on a triangled-shaped area outside the north entrance of the historic hotel.

“We wanted to create the ambiance of a delightful Parisian plaza, with brick- on- sand pavers and lots of trees to provide shaded areas where the public can meet, eat, drink and enjoy the urban experience” said Shana Oseran, who with her husband Richard, own Hotel Congress. “In Europe, plazas are where people gather and enjoy life. We hope this will set a trend in downtown Tucson where these open spaces are so needed”.

The new plaza will more than triple the outdoor seating available for patrons of the hotel’s Cup Café and bar.

The triangular shaped parcel was originally a portion of East 10th Street. The Oserans purchased the parcel several years ago to be used as the hotel parking lot. The parking is being reconfigured into a V-shape extending into the north part of the triangle formed by Fifth Avenue on the west, Toole Avenue on the northeast and the hotel on the south.

The plaza, which can also be used as a venue for outdoor concerts and other events, was designed by architect Bob Vint of Vint & Associates. Jeff Rhody and Lisa Ribes consulted on the landscaping, and the project is being built by NAC Construction of Tucson.

Completion of the plaza is being timed to coincide with the Aug. 20 re-opening of the Fourth Avenue underpass.