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Tucson-area homebuilders hustling to keep up with demand during COVID-19 pandemic
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Tucson-area homebuilders hustling to keep up with demand during COVID-19 pandemic

Low mortgage rates, remote work fuel unforeseen demand for new homes

Homebuilders are hustling to keep up with an unforeseen demand for new homes that is being fueled by low mortgage rates, lack of existing home inventory and a work-from-home model that appears to be with us for some time.

The Tucson market is also attracting tech workers from places such as Silicon Valley, who are indefinitely working remotely and want to leave urban areas and reduce housing costs.

With commute times no longer a major factor for homebuyers, outlying communities such as Gladden Farms, Star Valley and Red Rock are seeing a big uptick in interest, according to developers.

And one national homebuilder is introducing a new floor plan that includes a home office with modular desks, shelving, USB charging outlets and soundproof rooms.

In June, homebuilders pulled 428 permits locally compared with 351 in June 2019 — an increase of nearly 22%. New home closings were up more than 19% in that same time frame.

“Given the underlying fundamentals of our market, we’re generally optimistic,” said local housing analyst Jim Daniel, president of R.L. Brown Reports. “And, as these tech companies say, ‘This work-from-home thing is working really well, and you’re free to work wherever you want,’ Tucson is going to be a beneficiary.”

Daniel predicts the summer months will continue to see strong sales for new homes as existing homes for sale have dropped and they’re only on the market for an average of seven days, according to data from the Tucson Association of Realtors.

“The affordable option now in housing,” Daniel said, “has become the new home.”

“A LITTLE BIT SURPRISED”

Predictions for the housing market were dire in March and April as the coronavirus shuttered businesses and put people out of work.

Some homebuilders stalled projects and wanted extensions on their land deals, unsure of what was in store.

Then in June, some communities started selling between 10 and 15 homes a month and homebuilders were eager to buy up land.

In July alone, there were 375 lots sold in Star Valley, on Tucson’s far southwest side off west Valencia Road, and 232 lots in Gladden Farms in Marana, said land broker Will White, of Land Advisors Organization.

“We were a little bit surprised,” said Jeff Grobstein, president of Meritage Homes in Tucson. “No doubt that low interest rates are a real driver and resale has gotten gobbled up because some sellers have decided to stay put.”

He said the primary homebuyer is tired of paying rent and is taking advantage of low mortgage rates, but now that’s being complemented with migration from other states.

“People are accelerating their decision to leave California, the Midwest and Northeast, where the economic environment is less stable,” Grobstein said. “They want to get into a wide-open space.”

To keep costs down, homebuilders are building on smaller lots and putting up more spec homes so buyers can move quickly.

Meritage also offers flexible spaces in its new homes for a work niche and it is looking at ways to broaden the home-office options, Grobstein said.

Just last week KB Home introduced its new floor plan that offers an in-home office with modular furnishings.

“The pandemic has directly impacted the design of our homes,” said Amy McReynolds, president of KB Home’s Tucson division. “With more and more Tucson residents working from home, the need for a home office has become real.”

The office option will be an available feature at KB Home’s Bella Tierra development, near Irvington Road and Camino Seco, and at the Northwood Point community, near Ina Road and Camino de Oeste.

KEEPING UP WITH DEMAND

Developers of master-planned communities in the Tucson market are selling lots faster than they can prep it for homebuilders.

New homes are still pricier than buying an existing home, with the median price for a new home at $307,000 versus $230,000 for a resale home, but the lack of sellers is creating a demand for new builds.

“We are highly focused on moving as quickly as we can to continue to have lots prepared for our homebuilder partners with an efficient and streamlined lot delivery program,” said Bob Bambauer, executive vice president of Sunbelt Holdings, which has several communities around Tucson. “The Tucson housing market has shown great resiliency during the COVID pandemic.”

Dean Wingert, vice president of Crown West Land Group, said its Gladden Farms community in Marana has been a bright spot for homebuilder and homebuyer interest.

“We’ve sold 232 lots this year, have another 81 in escrow, and offers on the table for over 200 more,” he said. “The homebuying demand is acting as if the pandemic is a nonissue.

“All of the construction trades — carpenters, roofers, site work, plumbers, etc., are all as busy as can be and pushing to keep up.”

Demand for residential construction workers is at a record high around the country.

According to the Associated General Contractors of America, construction employment grew by 20,000 jobs in July — mainly in the housing sector — as government and private-sector projects remain on hold.

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

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In the first phase of the master-planned community, 50 single family homes will be built on 40 vacant acres on the southern end of the reservation, west of Camino de Oeste and Hermans Road. The second and third phase of Yaqui Square will possibly include high-rise construction with retail, office and residential space. 

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