About six years ago, an economist with an unusually pithy sense of humor labeled the four states hit hardest by the recession — California, Arizona, Nevada and Florida — as the "sand states." And, if you think of it, the label makes sense, as California and Florida boast sandy beaches while Arizona and Nevada are sandy desert locales.
The trouble is, the label, while eye-catching, was misconstrued. While Florida was a total mess due to the mortgage blowup and subsequent foreclosure crisis, in California the deep problems were more localized to the Central Valley and Inland Empire. In Nevada, the crush really happened in Las Vegas, while the heart of the crisis in Arizona seemed to be in Phoenix metro area.
Living in Arizona and always on the lookout for what the national news has to say about us desert dwellers, I still can find almost a story a day about all the bad things that have happened to the Phoenix metro, which we locally call the Valley of the Sun.
The metro is home to Arizona’s largest city, Phoenix; the third-largest city, Mesa; and probably the fourth, fifth, sixth — all the way to 10. It’s Tucson, the No. 2 city, that gets little notice, although with a population greater than 520,000 the city ranks as the 32nd-largest in the nation
The 118 miles between Tucson and Phoenix put it beyond the reach of economists looking for bad things to say about the formerly fast-growing Southwestern state. That was until recently, when I noticed Tucson popping up on different economic reports.
However, since the city is such a newbie to economic scrutiny, so far no consensus seems to have gelled, and readers are left with a push-pull effect. Has Tucson followed the other big desert cities — Phoenix and Las Vegas — into the economic maelstrom, or not?
It really depends on whom you believe.
According to a recent CNBC/Yahoo Real Estate story, Tucson ranks No. 1 as the country’s "emptiest" city, with rental vacancies at 15.9 percent (No. 7 in the country) and homeowner vacancy at 6.8 percent (No. 1 in the country) as of the second quarter of 2011.
On the other hand, something called The Fiscal Times in November listed Tucson as the U.S. city with the sixth-best job-growth rate in the country, at 2.6 percent. At a time when the national jobless rate was close to 10 percent, Tucson stood at 8 percent.
Tucson shares the distinction of being on both lists with much bigger Houston, which has been the fastest-growing big city in the country over the past decade. That should tell you something about one of those lists.
In any case, I thought I would check in with a couple of local sources to see exactly what was going on in Tucson.
The "emptiest homes" article was flawed because Tucson has a high amount of homes that are owned by winter visitors, which show up as nonoccupied, said Greg Hollman, president of the Tucson Association of Realtors and an agent with Coldwell Banker Residential Brokerage.
"In general, the Tucson market is moving through our REOs ("real estate owned" properties — mostly owned by lenders) and short sales. This has skewered our median and average sale price, but unit-wise we are really moving on."
In October 2010 the median sales price for a home in Tucson was $140,000, and for October 2011 it was $120,000.
"You have to put that in perspective," Hollman said. "We have a much larger volume of REO properties at the lower purchase prices than at the upper purchase prices, so it makes a difference."
Those Tucson REO properties have been flying out the door. "REO properties have been moving quickly, sometimes with multiple offers," Hollman said.
This has made an impact on total Tucson residential sales. "2011 unit sales through October showed a 12.8 percent increase over 2010, with 10,815 homes sold as compared to 9,588 homes sold through October (in 2010).
"On a monthly basis, the median sales price increased a little over 2 percent from $117,500 in September to $120,000 in October. The average sales price increased 0.74 percent from $150,699 in September to $151,812 in October."
"I don’t buy the idea that Tucson is in worse shape than any other city in the nation — it just doesn’t compute for me," said Marshal Vest, director of the Economic and Business Research Center at the University of Arizona’s Eller College of Management.
Phoenix and Tucson, as far as the economies are concerned, are both on very similar paths, said Vest. "Both were hit very hard during the recession. Phoenix may have been hit a little harder than Tucson. Housing prices, for example, have fallen (more steeply) in Phoenix, down more than 50 percent, but declined just 35 percent in Tucson."
In regard to jobs, the state lost about 11 percent from peak of employment in 2007, but in Tucson it was more like 9 percent, Vest said. "Tucson didn’t lose as much of its workforce as did Phoenix."
As for rental vacancies, Vest said, "the numbers I look at come from the 2010 census, and Pima County (home to Tucson) had the lowest vacancy rate of any of Arizona’s counties at a little over 11 percent. Statewide it was 16.2 percent. I don’t know where CNBC/Yahoo Real Estate numbers came from."
If you still like Tucson as a primary or secondary home market, then you better act quickly because the window of cheap housing may be closing.
"Total unit sales increased by 30 percent in October 2011 as compared to October 2010," said Hollman. "The number of active listings decreased by 28 percent over the same period. When you combine that with not a lot of new-home construction, at some point we are going to have a tight market."
