2024 Power of Real Estate Summit Offers State of Regional Housing Industry

Power House

By Tom Leyde

Demographics and attracting new businesses, the redevelopment of Foothills Mall and industry challenges were on the agenda at The Power of Real Estate Summit, hosted by the Tucson Association of REALTORS® and Southern Arizona Home Builders Association.

The need for more housing continues to be a major factor, said Jessica Lautz, deputy chief economist with the National Association of REALTORS®, in one of the key sessions at the summit. With interest rates at 7%, the cost of a monthly mortgage payment on a $350,000 home has increased by $600. And the income required to purchase a home increased dramatically by $25,000 last year.

“It’s a different market than a couple of years ago,” Lautz said at the event held April 19 at the Tucson Convention Center. “We’re not a balanced market yet, but home prices are still going up.”

Lautz added that 28% of home buyers don’t care about interest rates because they’re paying cash, and last year, 29% of homes sold went above listing price.

Demographically, millennials are the country’s largest demographic group. The median age of a home buyer today is 35. People are renting longer to save money to buy a home, and Gen X is the most likely to buy a multi-generational home, she said.

In the 1960s, Lautz said, 70% of adults were married. Today, only half of adults are married, and 30% of recent home buyers were single women.

Other points from Lautz’s address:

  • The number of home buyers with kids has plummeted. There has been a huge increase in older home buyers who have no kids at home.
  • 19% of home buyers factor their pets in a purchase.
  • Commuting time is another important factor.
  • Migration to other states continues, but at a smaller rate than during the COVID-19 pandemic.
  • More people are buying homes sight unseen and view them online.
  • It remains a seller’s market.

Lautz also commented on demographics in home ownership, noting that last year, home ownership by Hispanics and Asian-Americans reached an all-time high of 3.2 million. In 2023, more than half of home buyers were African-American, Asian-American and Hispanic, and 29% of African-American home buyers were single women. In the next five years, the number of renters meeting the median home buying age will be higher for Asian-Americans (13%) and African-Americans (11%).

Joe Snell, president and CEO at Sun Corridor Inc., discussed economic development in the region. 

Over the last several years, Sun Corridor has successfully facilitated 200 business relocations, representing 5,700 jobs and adding $36 million to the local economy. “We create wealth through the recruitment and expansion of primary companies,” he said.

Snell said there is strong corporate demand for larger buildings and large pieces of real estate. The average business building is 300,000 square feet and the average real estate is one to three acres.

One of the biggest challenges, he said, is that many large land parcels around Tucson are state-owned. Snell also said the area has seen a 40% increase in manufacturing products, led by the automotive and clean energy fields. Labor remains a key economic driver.

“Companies want to know if they can find skilled employees in the market,” he said. “Anybody who has skills and wants a job, they’re out there. Our success has really been in our ability to attract, retain and train a qualified workforce. If we can attract them, companies will follow.”

But skilled employees need housing, he said. “If we’re going to attract more industry, we have to get a bigger inventory.”

Uptown Update

One of Tucson’s most anticipated real estate projects is the redevelopment of the Foothills Mall site, to be called Uptown. Don Bourn, president and CEO of Bourn Companies, the project developer, presented an update on the ambitious project. 

The first new building for Uptown is under construction. The project will be Tucson’s first high-density, urban village outside of Downtown Tucson. It will be a mixed use of retail, high-end residences, hotel rooms, entertainment and fitness.

Uptown is based on several fundamental elements: safety and security, design and aesthetics, food and beverage entities, health and wellness, hospitality and technology.

All of this will be contained within 2 million square feet, to include 700,000 square feet of retail, 750 to 1,000 square-foot residences, and 400 hotel rooms. 

The first building will be 250,000 square feet, including 157 residences and 150,000 square feet of retail. The second building will have a 144-room hotel, with a second-level pool and 20,000 square feet of ground floor retail.

The third building will be six stories, with four levels of residential units, including three levels of urban lofts (400 to 700 square feet) and a top floor of penthouses (2,500 square feet with 12-foot ceilings), and a ground floor with modern entertainment uses. The project also will include a 900-space parking garage. Construction is expected to be completed in 2027.

The Housing Equation

A panel of speakers tackled the subject, “Solving the Housing Equation: Perspective on the Challenges and Opportunities.” Here are some key points:

  • Kevin Kaplan, COO of Long Realty Company, said the Tucson area has 35% more housing inventory over last March, but is still below the years 2015-2019. That means it is 1,200 listings short of normal. Growth is coming in higher-end homes. It’s still a seller’s market, home prices are going up and there are still many people who want to own homes.
  • Anjela Salyer, president of Mattamy Homes’ Tucson Division, said builders are still paying high prices for materials and labor. “We don’t have a very deep trade base so builders wind up competing for it. That helps drive higher prices,” she said. It’s taking 12 to 18 months to get homes built now. There is much state land around Tucson and her company’s team works with state trusts to promote and advocate for more land for housing. But, she said “it takes years and years for that to come to fruition.”
  • Jim Tofel, a general contractor and managing member of Tofel Dent Construction, said there has been a 75% increase in construction costs since 2015, starting with lumber. Lumber costs rose from $300 per board foot to $1,600 per board foot in six months. Costs for electrical, air conditioning and concrete rose as well. There are more inspections and projects are taking longer to complete. He said a building slowdown expected in 2025 and 2026 may help decrease labor costs. There is a need to create opportunities for people to buy homes. He suggested that reducing parking requirements and making building codes more flexible will make building easier.

Urban Zoning

M. Nolan Gray, research director and land use expert for California YIMBY, spoke on legal issues affecting housing in Arizona. He is author of the book, “Arbitrary Lines,” about zoning. 

“We have a long, long way to go to solve the housing shortage,” Gray said. “We’re simply not building enough housing. It has increasingly become an issue across the country.”

Gray said people are spending a larger share of their income on housing and the only way to grow is to expand outside city boundaries.

“Rule changes can result in more housing supply,” Gray said.

He offered the following suggestions to help boost housing:

  • Reduce lot size mandates and streamline the building process
  • Consider changing rules for granny flats, mother-in-law units and casitas
  • Legalize mixed use in commercial districts
  • Be more flexible with height restrictions
  • Do more infill housing
  • Review parking requirements
  • Support growth
  • Consider smaller yards and shared common areas
  • Reduce time from permits to construction
  • Change zoning for multi-family housing in residential neighborhoods
  • Consult state and local planners to lessen regulatory barriers for new affordable housing
  • Work with “not in my backyard” (nimby) groups
Pictured above – Solving the Housing Equation Panel – from left: Panel Mediator Jeremy Sharpe, President, Sharpe and Associates; Jim Tofel, managing member of Tofel Dent Construction; Anjela Salyer, president of Mattamy Homes’ Tucson Division; Kevin Kaplan, COO of Long Realty Company  
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