In 2014, the recession finally seemed to be behind us, and the real estate trajectory for new home demand and sales was heading north. The semi-custom builders had proven sales up to the $650,000 price point. The custom home builders were still leery of the demand for new luxury homes and knew the inventory of existing, $1M+ homes, their main competition, was still quite large. Additionally, homes that were selling for $1.5-$2M in 2006 and 2007 were available for $900,000- $1,500,000 in 2013 and 2014.
Pretty daunting to take the risk of building a new luxury home. Still, two builders took the plunge and did it.
The first true, high-end spec home in years was built and sold in March 2014 in Skyline Country Club Estates. Designed by Kevin Howard, this was a 5299-square-foot, contemporary home built on a premier, view lot.
Although the home sold for $900,000, which appears incredibly inexpensive for a home in this location and of this size, the true price was much higher. Under unusual circumstances, the buyers purchased it early in the development stage when the house was basically a shell without a kitchen, several interior walls, heating or cooling, flooring, or appliances. The listing broker estimated the cost to completion was approx. $400,000, thus the real, “finished” purchase price was $1,300,0000+/-.
The second and last custom spec home of 2014 was a 2706-square-foot contemporary home built in Sin Vacas, which sold in July and closed in November for $735,000. This builder took an inexpensive and difficult lot to develop (although the views were excellent) and created a fairly-priced, custom home that sold quickly. Thus the resurgence of custom spec homes in the Foothills had begun.
In 2015 and 2016, this trend has slowly but steadily grown. Although still representing a small percentage of the overall luxury home sales market, three spec homes were sold in 2015 in Alta Vista Village 2, Alta Vista Estates, and Catalina Foothills 10; a 4200-square foot home for $900,000, 4570-square-foot home for $973,000, and 4934-square-foot for $1,600,000, respectively.
In 2016, although only two homes had closed, they were significantly larger and more expensive than previous ones. Their sale prices of $1,600,000 for a 5610-square foot home in Catalina Foothills 10 and $2,197,500, 6202-square foot home in Finisterra indicate the custom builder’s view of a strengthening Tucson economy, and greater demand and market acceptance for newly constructed, luxury homes.
Additionally, as of this writing, there are currently five luxury spec homes on the market priced from $1,095,000 – $1,795,000. Also, I know of two more, both in Ventana Canyon, that will be priced at approximately $1,000,000 which are currently being designed and will begin construction shortly.
I can say with confidence that high-end, spec home building is clearly part of the luxury home market resurgence that was alluded to earlier in the headlines of the Arizona Daily Star article. More custom builders are entering and re-entering the market every year, and I expect that to be the case for 2017 and beyond. Coupled with greater consumer confidence, stronger local job growth, historically low interest rates, and vacant land prices, custom home building should again become a profitable, wide-ranging business providing luxury home buyers with many new, high-quality home options in areas throughout the Tucson metropolitan area.