Wednesday, May 2, 2012

The Truth About Investing in Tucson Real Estate

I have received several calls in the past few weeks, all from Californians, who have heard that the National Association of Realtors has declared Tucson to be the best place in the country for real estate investment. The whole country is abuzz with the news that investors are paying $40,000 for houses here and flipping them. This is true. The missing piece of this exciting news is that a $40,000 house is uninhabitable and/or not in a great part of town.

As of today, we have 231 listings priced under $50,000 in the Tucson Multiple Listing Service. Take out the coops, the condos, the townhouses, the mobile homes and the manufactured homes and we have 59 single family houses priced under $50,000.

In April, 69 single family houses priced under $50,000 were sold through the MLS. A few others were sold at trustee sale, but that is the subject for another blog entry. Of those 69 single family houses, 51 were foreclosures, and 8 were short sales. So only 10 sales were what we used to consider "normal sales": the seller was a person, not a bank, and that person had equity in his house.

In April, the 59 foreclosures and short sales were what we call "distressed sales". Distressed is supposed to describe the financial circumstances under which the house is being sold, but I would venture to say that in most cases the buyer was pretty distressed before the sale was completed.

The investors who are profiting from Tucson's low prices are already here in Tucson. They are able to act decisively when one of these bargains becomes available. They pay cash, and have the knowledge, contractors and money to get the house renovated and back on the market quickly.

The number of houses for sale is way down. The number of buyers is way up, back to 2007 levels, before the housing market imploded. Fixing and flipping houses is a very competitive business. NPR got it right yesterday in their segment on Arizona real estate.

I still think Tucson is a great place to own a home and rentals. Some investors are making a killing here, but they are fix and flip pros. For the rest of us, the best strategy may be to buy a house in good condition in a good neighborhood, rent it out or live in it for a a few years, and hope that the current upward trend in home appreciation continues.

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