ÃÛÌÒÓ°ÏñAV

Top homebuilders sold between 45 and 70 new homes a month in the first quarter of the year, with average selling prices of around $450,000.

And existing homes for sale remain scarce, so demand for new homes is at its peak.

Those combined factors would suggest that homebuilders are eager to build even more homes.

Yet permits for new home starts are down more than 36% in the first quarter of 2025 compared to the same period in 2024.

“Perhaps the biggest challenge the local housing industry is facing is the uncertainty,� said local housing analyst Jim Daniel. “How to plan, how to price costs of construction, how to anticipate future volumes of sales, the availability of materials and components, the timing of land deals, and a myriad of other elements.

“It will be a tough time to ‘wing it.’�

Permits for new homes have fallen for the past nine months and the year is expected to end with about 3,700 permits pulled, Daniel wrote in the monthly about the housing market.

By comparison, at the end of 2024, homebuilders got 4,183 permits for new homes.

For perspective, 30 years ago the Tucson market issued 4,600 permits for new homes and averaged 7,500 a year in the early 2000s.

Sales here are respectable but not as robust as expected, said David Godlewski, president of the .

“Prospective buyers are concerned about macro-economic uncertainty and are proceeding with caution,� he said. “As a result, builders are carefully evaluating the best path forward to maintain sales pace and open new communities without being overextended.

“The situation is stable but not without its challenges.�

Prices for new homes have been steady for the past 12 months, with the average in the mid-$400,000 range, peaking briefly over $500,000 in January.

Industry experts predict the continued demand and the growth of industrial companies that produce jobs will drive homebuilders to get more permits.

Right now, many builders are finishing and selling previous spec homes, where they would once wait for the buyer to pick from a floorplan and then build.

Now those spec homes are being built out and move-in ready.

“This is helpful to our supply concerns here,� said Will White, a land broker with . “Sales and closings are both up, so is traffic (and) it won’t be long until the housing inventory needs to be reloaded.�

He said the number of active communities to build in is low, and land is taking longer to secure and then prepare for homebuilders.

Twenty years ago, there was an average of 160 active communities being built that homebuilders could buy a piece of. Today, it’s about 50 or 60.

“We are building less homes than we did in 1995, not because the demand isn’t there, but the region doesn’t have the community count to do more,� White said. “If we don’t hurry to grow community count in the region, we accelerate the supply problem and then amplify the affordability issue.

“We’re not getting ahead of this at all.�

He said the homebuilding industry has always been cautious, but the demand isn’t letting up.

“We fully expect permits to start to rise through summer as builders prepare for their fiscal and calendar year-ends,� White said. “The market here is moving quite well.�

Meritage Homes continues to be a top builder locally and sold 598 new homes in the past year. This March alone, the homebuilder sold 70 new homes.

Meritage currently has in the Tucson area with at least two more scheduled to open this year.

“We continue to see strong demand driven by population growth, job creation, and relative affordability compared to other southwestern markets,� said Jeff Grobstein, the company’s regional president. “Tucson has a solid economic foundation, and buyer interest remains steady, especially among first-time homebuyers and move-down buyers.�

He believes the decline in permits is driven by concern about unknown scenarios.

“It’s a combination of caution in the industry, cost pressures, and timing,� Grobstein said. “Some builders are hitting the brakes slightly to avoid oversupply.�

He said Meritage is strategically pulling more permits.

“We are — though selectively,� Grobstein said. “We’re being strategic about where and when we pull permits, balancing current inventory and expected demand while managing construction timelines and costs.�

He agreed the mix of strong sales and prices with falling permit numbers is unusual.

“It’s definitely a unique mix,� Grobstein said. “Sales remain solid, but builders are keeping a close eye on affordability, interest rates, and supply chains.

“The demand is there, but everyone’s just being a bit more tactical.�