Tucson Multifamily Market Forecast 2015
By: Chuck Corriere and Jessica Rubin
A look ahead at the new year! Here are our observations and predictions about the multifamily market in Tucson for 2015.
We are basing our predictions on a several factors including the following:
According to the census bureau, Millennials are moving into the main stream economy. They are largely a group of made up of 23 year-olds and they are expected to delay major life decisions much longer than previous generations. They are feeling financially secure enough to leave their parent’s homes–but not yet secure enough to buy or rent a single family home. Millennials are graduating college with more debt and searching for jobs in a difficult market. They will not have the funds saved up for a down payment and are facing strict lending regulations. They are also inclined to wait longer to get married. This means that they will be more likely to rent for more years after college until they are settled in their careers and have have money saved for a down payment to buy their first home. We also note that Millennials are seeking different life style choices than earlier generations. These life style differences suggest for less living space and more life-style amenities such as walk to shop, recreate, exercise and socialize.
Tucson lost 18,100 jobs since 2007. We have gained back most of the jobs by the end of 2014 but not enough to be considered a recovering economy. Raytheon and Davis-Monthan AFB accounted for 21.4% of the new jobs created in Tucson. Tucson has experienced job losses at a time when the nation has returned to and now surpasses pre-recession employment totals. According the the data, trade, transportation, utilities, manufacturing, construction and government sectors all experienced net job loss in the Tucson Metropolitan Area. With slow job creation, Tucson will continue to experience recession like economic malaise.
In the last two years several large multifamily projects were completed and closely matched the demand for rentals. No new large scale projects are expected to be completed in the first half of this year, which means many new renters will be filling in currently vacant units. Currently there are 972 planned units of multifamily construction with 655 units under construction.
Tucson rents are predicted to rise by 2% in 2015 overall. The various sectors of the Tucson Market area will experience varying rates of rent growth. The highest rent is found in Oro Valley/Catalina submarket at an average of $849 per unit. South Central Tucson experienced a decrease of $31 over the previous quarter.
COST OF RENTING VS. BUYING
Currently mortgage payments are comparable to the cost of rent, however the cost of owning a home is expected to increase in the next 2 years due to higher interest rates and moderate price increases. Renting will be the most cost effective option for many, especially considering the occasional maintenance that can be expected by a home owner.
MarketBeat chart courtesy of PICOR
TUCSON HISTORICAL VACANCY RATES
2012 – 9.91%
2013 – 9.41%
2014 – 8.87%
Deal Maker Team Tucson Vacancy Forecast:
2015 — 8.29%