Prospective downtown dwellers are feeling sticker shock as home prices and rental rates in the city’s core continue to rise.
A limited inventory of homes for sale in the 85701 ZIP code has pushed prices up over 20 percent from last year. Rental rates in that ZIP code are the highest in the city and 13th highest in the state.
The Housing Report by Long Realty shows 85701 is the only ZIP code where home prices have increased by more than 20 percent from 2016.
Using a three-month trend, Long found the median price for a home downtown rose from $285,000 in 2016 to $357,000 this year, based on prices from April to June of both years, said Kevin Kaplan, Long’s vice president of marketing, technology and training.
“In the overall market, there’s not enough inventory for demand,” he said. “It’s very much a seller’s market, especially for homes under $300,000.”
Neighborhoods around downtown are showing home price increases of 1 to 20 percent.
“National trends are that people are migrating toward urban residences,” Kaplan said.
Rental rates in the downtown area, meanwhile, are now the highest in the city with an average of $1,187 per month, data from the Rent Cafe shows. The 85701 ZIP code fetches the 13th highest rent in the state, behind Phoenix, Scottsdale, Tempe and Chandler.
The second-quarter Apartment Insights report shows the average monthly rent in metropolitan Tucson, without utilities, was $709, a $16 increase over the first quarter of the year.
Few conventional apartment projects are in the pipeline, as the average rental rate does not justify new construction, said Mike Chapman, senior vice president and multifamily specialist with NAI Horizon.
“The only buildings that developers have economically been able build in the last 10-plus years are luxury rentals and tax credit properties,” he said, referring to projects such as veteran or low-income senior housing.
“Apartment units that are either under or scheduled for construction remain at slightly under 500,” Apartment Insights reports. “More projects are moving through the pipeline, but not at a pace that would indicate any rapid growth in units nearing completion.”
Aside from 85701 ZIP code, three other ZIP codes have rental rates higher than the state average of $947.
- 85719, around the University of Arizona, $1,100
- 85737, in Oro Valley, $1,000
- 85742, in Tortolita, $966.