In response to a booming housing market in the Tucson area, the state is auctioning swaths of trust land for future housing developments.

Earlier this month, KB Home paid $10.6 million for 210 acres on the northeast corner of Camino Seco and Irvington Road.

State Land Commissioner Lisa Atkins said it was the first residentially zoned trust land in Tucson sold at auction since 2006. A second auction, featuring close to 47 acres near Irvington and Houghton roads, will be held Oct. 9 with a minimum bid of $425,000.

“I’m particularly pleased with the results of this auction in Southern Arizona,” Atkins said. “It’s solid evidence of Tucson’s strong market for new housing.”

With only a handful of master-planned communities within city limits, the state’s willingness to open trust land for auction is significant to homebuilders, said land broker Will White, who runs the Tucson office of Land Advisors Organization.

“It is great to see these strategic pieces brought out to auction and made available,” he said. “We need to begin preparing more land in order to accommodate the strong demand we are seeing and the metro area’s growth potential.”

White said KB Home’s purchase is likely to be noticed by other homebuilders.

In the past four years, land acquisition has trailed single-family home permits, White said.

“Builders are selling out of communities faster than they are replacing them,” he said. “They have to get ahead of this in order to pave the way to accommodate the increase in demand we are seeing. Best way to do that is making bigger plays on land like this one.”

The state’s decision to put trust land up for sale is due to Tucson’s expanding economy, said Wesley Mehl, deputy state land commissioner.

“The State Land Department has made it a priority to identify parcels in Southern Arizona that are market-ready and to schedule auctions for such parcels to meet existing demand for residential and commercial uses,” he said. “As market conditions continue to be favorable, it is very likely that more state trust land in the Tucson area will be offered at auction in the near future.”

He said the department reviews market conditions, existing demand, physical characteristics and adequacy of existing infrastructure when it makes sales decisions.

K-12 public education is the largest beneficiary of trust land managed by the Land Department. Others include the state’s three public universities, Arizona’s adult and juvenile corrections facilities, the Arizona Pioneers’ Home, the Arizona Schools for the Deaf and the Blind, the Arizona State Hospital and state government buildings, Mehl said.

SOUTHEAST HOUSING MARKET

KB plans to build more than 700 single-family homes at the newly purchased land in four phases, with the first phase beginning in the second half of 2019, said Amy McReynolds, president of the KB Home Tucson division.

“It’s surrounded by existing infrastructure and homes,” she said. “In our minds, it’s an infill project.”

The southeast submarket has been a good one for KB.

“We wanted a long-term presence out there and this piece allows us to have that,” McReynolds said. “The idea is that the housing prices will be less than in Vail, which will allow us to diversify the housing product.”

She expects homes to start around $200,000, but that is subject to change depending on the market conditions when sales begin in early 2020. But, as with most of KB’s infill communities, the homebuilder is mindful of affordability.

“We try not to stray too far from the first-time buyer,” McReynolds said. “We’ve been part of the Tucson market for 20 years and we have the support from the company to continue to grow.”

KB Home is expected to move into the top five closing builders this year for the first time since 2010, according to the latest Southern Arizona Housing Market Letter, published by housing analyst Ginger Kneup, owner of Bright Future Real Estate Research.

Contact reporter Gabriela Rico at grico@tucson.com. On Facebook: Facebook.com/DailyStarBiz