Slowdown in Home Construction Resonates Throughout Arizona

The once red-hot housing market in Arizona has slowed in recent months to a point where it’s merely “normal,” a local real estate expert in the town of Sahuarita says.

The 3.3 percent growth in Tucson-area home sales in 2005 will probably fall to between 2.6 percent-2.9 percent by the end of this year, John Strobeck, an area housing analyst, told the Arizona Daily Star.

The slowdown in residential construction may appear more dramatic because it follows two very hot years of Arizona mortgage demand.

“Don’t say this is a bad market. We’re still going to do the third-highest volume of sales ever this year,” in the Tucson metro area, Strobeck said.

Still, town officials suspect the slowdown probably played a big role in last month’s decision by American-Nevada Co. officials to withdraw its request for the town to annex about 5,000 acres west of Sahuarita, where the home builder planned to build up to 15,000 homes.

Strobeck predicts the residential market will remain at the present pace through 2007 and then pick up in 2008. Ken Herb, an associate broker at Coldwell Banker Residential Brokerage in Green Valley, agrees home sales have slowed over the past few months because, “It’s getting back to more of a normal market.”

That means it’s taking longer to sell houses, but he says the market is still strong. Of benefit to prospective home buyers are incentives such as free pools or backyard patios, as well as “some really stunning discounts.”
The slowdown in real estate impacts far more than just the Phoenix housing market. It has reduced the flow of revenue to Sahuarita generated by construction, especially the sales tax, according to town manager Jim Stahle.

That won’t have an immediate effect, because the revenues were generated months ago, when home builders applied for building permits.

“We’ll take that into consideration when we put together our next capital-improvement program,” Stahle said.

Town officials knew that construction in Sahuarita eventually would slow, so they budgeted accordingly and slowed down spending on projects for the coming fiscal years. To get a better idea about the potential impact of the falling revenues, Stahle said he has directed staffers to review growth projections for the coming years.

“As of July 1, 2006, we estimated our population at about 19,235 people. That estimate may get revised down — I’m hearing something in the 18,000-person range. That could certainly have an impact,” he said.

If Arizona mortgage rates remain low, people will be tempted by the area’s relatively low land prices. Town officials use population projections to anticipate construction related revenue and to anticipate the need for additional facilities and services.