2 Engineers, 1 website.

 

Financial Jiu Jitsu will teach you how to gain leverage in the real world, step by step, until you are confident you no longer need more.

How much higher will real estate go in Tucson anyways?

How much higher will real estate go in Tucson anyways?

Dave here. After spending a weekend working on my 'vette and my truck I'm back and ready to give you guys even more insight. There are quite a few articles I have written on this site about Tucson AZ and the real estate market there. Here are a couple for review if you are into that sort of thing:

So now I am essentially wondering exactly how high the markets in my favorite little town will go. There are three option here. The market could go up, down, or remain the same. Duh Dave, why would you even write that? 

The case for markets going up: Inventory of awesome houses is running out. Foreclosure rate is tanking. Less and less people are underwater with their mortgage, and therefore less likely to sell for penny's on the dime and file bankruptcy. Unemployment has been trending down nationwide and Tucson is no exception to this.

The case for markets remaining the same: Fed rate hikes could effect interest rates and inflation in unknown ways. Mortgage rates could easily start climbing again which would put a lid on market expansions. Nationwide GDP is not fantastic, but seems stable enough in it's 2% increases. 

The case for markets going down: The sky could fall! Don't laugh, it happened in 2008 and it could very well happen again for any other reason. You may be able to discern from the title of this blog post that I do not believe this will occur anytime soon.

So to answer my earlier question that I hinted at: How much higher will the Tucson market go?

Welp, since the US housing market average has recovered to it's prior levels, I would say that Tucson will to.  

Source

Source

As you can see, nationally, we are essentially where we were prior to the housing bubble bursting in 2008. However, the house prices in many areas have still not recovered to their pre-recession highs. Tucson is one of these places. 

Here are 3 graphs of Tucson as a whole and a couple of the zip codes in the northwest area that I grabbed from Trulia:

The average price for Tucson properties is currently sitting at 72% of it's pre-recession peak (205k/285k.) I would assume, because of the across the board improvements in economy, unemployment, and market, that the home prices will at a minimum return to their pre-crash highs. I do not feel this is a risky assumption. Especially in light of the fact that the US average home price has already completely recovered, and Tucson is trailing that by a reasonable margin. This trailing trend is rampant throughout middle America, and many investors have pointed out that this may be enough of a reason to invest there. Many cities in the US have already blown by their pre-recession numbers quite handily, hence the national average being in the middle of the road by definition.  

So to answer my own question; I believe that it is likely Tucson home values will improve by an additional 28%. How long it will take is fairly arbitrary to me personally, but since that info is relevant to most people, I will ballpark it for you:

  • a conservative estimate would be that a full recovery will occur in the next 5-10 years.
  • An aggressive estimate would see this bounce back up in 2-3 years. (I believe this personally but cannot justify it. So alas, it is a risky estimate at best)
  • Realistically, the recovery will fall somewhere in the middle of the road at 4 years.  

There you have it, 28% in 4 years is not bad at all. It ain't gonna to turn you into a millionaire but at this point that'll do pig, that'll do.

ddave
Forced to be Frugal

Forced to be Frugal

The Hidden Benefit of Working Insane Hours

The Hidden Benefit of Working Insane Hours