What a welcome headline last week in the Business Section of the Arizona Daily Star:
“County Foreclosures Lowest Since ’07.” The article by Gabrielo Rico quotes data from the Pima County Recorder’s Office showing there were 372 home foreclosures in the first three months of 2017, the lowest since 2007 when 251 homes were sold in the same period. From 2007, that number rose steadily to a peak of 2,052 foreclosures sold in the first three months of 2011. These trends are being seen in other markets nationwide the article states. “Analysts say the lower foreclosure rates are consistent with lower unemployment rates and lower inventory. That is causing home prices to rise across the country.”
The vacant land and lot markets tend to follow the path of the residential market, and the foreclosure rate is certainly a case in point. Between 2007 and 2011, most of my business was in the representation of lenders through their REO (Real Estate Owned) Departments. Foreclosures were coming in all shapes and sizes of parcels, from 7000-sq. ft. urban in-fill lots to 40-80-acre rural parcels, as well as high-end, gated Foothills site. During that period I had as many as 40, REO lots available at a given time including single lots, small, finished subdivisions and unfinished, platted subdivisions.
In March of 2017, I put in escrow the next-to-last REO land in my personal inventory: 9 partially finished 1-acre lots on Silverbell Road near El Camino del Cerro Rd listed as a package for $75,000 (and contracted well below that). I still have 1 REO parcel listed in Saguaro Ranch, which originally sold for $1,200,000 and is now being offered at $110,000. Although a bargain basement asking price, the lot will require $200,000+ in development costs prior to home construction.
Currently, in the Tucson Multiple Listing Service (MLS), there are 105 parcels of land listed as REO land. In taking a closer look at these properties, a very small proportion are actually located in the Tucson Metropolitan area (fewer yet actually being custom home sites), and most are in remote rural areas of Southern Arizona. The great majority of the remaining foreclosures are found in the Arizona cities of Nogales, Rio Rico, Tubac, Sahuarita, Marana, Sonoita, Vail, Hereford, Benson, Ajo, Elgin, and Pierce. In Tucson, besides several lots in Diamond Bell Ranch on the far southwest side, there are a few small in-fill sites, two very difficult lots to develop in Dove Mountain, and seven home sites in Stone Canyon. Clearly, the inventory of available REO land in Tucson has finally been sold; the last few lots having little or no effect on the overall market.
We always knew that the Land Market wouldn’t fully recover until the heavyweight and influence of the foreclosure inventory were sold. We’re finally at a point where this influence is gone and the land recovery has clearly begun. Rising land prices, more contracts and sales and shrinking inventory are the sure signs that this is happening and what we’ve been waiting for for many years.