The Tucson housing market is ripe for plunder and now is the time to buy, according to Eller economist Marshall Vest, the author of the Eller College of Management’s 2012-2013 Economic Outlook Report.
The housing market is one of several economic sectors that the report, updated quarterly, identifies as being on the rebound after a multiple-year slump. Vest said a lack of new housing in the city combined with low interest rates are driving demand and home price appreciation up.
“Additionally, the cost of housing compared to household income is the best it has been going back a couple of decades,” he said. “Housing affordability stands at the highest level it has ever been.”
Vest said the current market is a result of fallout from when the housing bubble burst in 2007.
“Before 2007, lenders and most homebuyers were working on the assumption that housing prices would go up indefinitely,” he added. “Everyone wanted to buy and no one wanted to rent.”
He said the current market is the flip side of the coin. People would rather rent than buy due to what they perceive as a market still in the midst of a collapse.
“Homebuyers asked themselves, ‘Why put money in an asset where the price is declining?’” he said. “But I think that has started to change in the last few months. We are now seeing prices beginning to go back up.”
Vest said housing affordability has been so good in 2012 that, in fact, the monthly cost of owning a home is comparable or even lower than the monthly cost of renting.
David Fotheringham, a Tucson realtor for Ability Rental Homes, said options such as the FHA Kiddie Condo Loan Program allows parents to purchase a home with an initial down payment of as little as 3.5 percent, as compared to a 20 percent industry standard.
“We are pretty close to the bottom end of the market,” he said. “With the really low interest rates being offered for qualified buyers it is absolutely possible to make money off a home purchase in as little as four years.”
Vest said the downside to the current buyer’s market is the difficulty for many would-be homeowners to obtain financing.
“Lenders are very cautious and require all kinds of documentation
as to your credit record, your income, stability and so forth,” he said. “So for students and recent graduates, purchasing a home could be problematic.”
To top things off, Vest pointed out that rent for student housing has been on the rise this year as well.
“Rent at apartment complexes has been going up pretty significantly,” he said. “So for the students or families of students who can afford it, the balance is in favor of homeownership.”
Joleen Swift, a 2006 UA graduate and office manager for UniversityApartments.net, said the rental rates for apartments her company lists in close proximity to the university have gone up by about 4 percent this year. She said one-bedroom lofts two blocks from campus are going for $675 per month.
Iran Andrade, an employee in the office of Off-Campus Housing and Commuter Resources, said for the students and recent graduates unable to purchase a home outright, there are still many affordable apartment and home rental options around the university. He said there are multiple listings for under $400 a month.
Chula Robertson, a global studies junior, said she has lived off-campus in a rental home her entire collegiate career. “We call our place the clinic. It gets pretty rambunctious,” she said. “The three of us pay around $550 per month apiece.”
Jenny Fink, a communication sophomore, said she plans to leave her on-campus housing to live at NorthPointe Student Apartments, where she is signing a five-month lease at $500 a month.
Vest said the Eller College of Management will release its next midyear economic report this June at the Westin La Paloma Resort.
“Our predictions are considered to be among the best by our peer institutions in the Western states,” he said. “We will go over the recent trends, and I will offer a forecast that I put together using econometric models, to forecast the economy.”
