Home Prices Continue to Rise

Jennifer Pullen, Senior Research Economist

The median sales price of existing single-family homes in the Tucson Metropolitan Statistical Area (MSA) has steadily increased since the end of the Great Recession. Tucson’s median home price of $223,000 in 2018 was at an eleven-year high and just slightly behind prices posted before the recession. When compared across 12 western metropolitan areas, Tucson had one of the lowest median home prices, with only El Paso and Albuquerque lower. San Diego had the highest median price for homes at $634,000. Price fluctuations in Tucson between 2000 and 2018 followed roughly the same pattern as the nation but with a much steeper rise and fall during the recession; however, they were not nearly as volatile as prices in Phoenix. Home prices in Tucson have been steadily increasing since 2011. Figure 1 displays median home price for Tucson and peer MSAs.

Figure 1: Median Home Price (2018)

Tucson's median home price when compared to the nation and Phoenix is substantially more affordable to those earning the local median family income. To learn more about how affordable housing is in Tucson visit MAP's indicator on Housing Affordability and a previously featured article on Rental Affordability

Why is it important?

Home prices reflect supply and demand in the housing market which in turn can echo the general economic health of an area. Several factors can influence home prices, including population growth, mortgage rates, and the business cycle. The home is the largest asset for most people, and the price of a home can affect spending in other areas. Since personal consumption makes up the better part of the economy, and discretionary income levels are influenced by the cost spent on housing, home prices are an important factor in the local economy. 

What are the key trends?

The Tucson MSA’s 2018 median sales price of $223,000 was nearly $40,000 less than the national median. The median home price for a single-family home was also significantly less in Tucson than Phoenix, with more than a $46,000 difference. Home prices nationally began a distinct rise around 2004, peaking in 2006, followed by a drop beginning in 2008 (see Figure 2). Tucson home prices followed the same general pattern, but had a much steeper rise and fall. Median home prices bottomed out for Tucson in 2011, decreasing 45.1% from the peak in 2006, and have since risen 65.8%. Tucson house prices are now just below their previous peak. While Tucson price fluctuations were more prominent than that of the nation, they were not nearly as volatile as prices in Phoenix.

Figure 2: Median Home Price

The median price of existing single-family homes in the Tucson MSA has grown at a modest rate since the Great Recession. In the two years following the recession prices increased rapidly at approximately 12% per year and then stabilized near 4% annually. Price increases have picked up again the past two-years with growth of 10.5% and 6.0% respectively. Growth rates were significantly higher in Tucson in the five years preceding the Great Recession with an average annual growth rate of 14.0%. That was nearly double the U.S. median growth rate of 7.3% during the same period. As Figure 3 illustrates, Tucson’s growth of 6.0%  during 2018 placed it squarely in the middle of comparable peer MSAs, with Las Vegas posting the fastest growth at 12.6% and El Paso the slowest at 2.8%.

Figure 3: Growth Rate in Median Home Price

How is it measured?

Median home price represents the sale price of existing single-family homes for which half the homes sold for more and half for less. These data come from the National Association of Realtors (NAR), which tracks and compiles existing home sales from local associations/boards and multiple listing services nationwide. NAR differs from other measures that are designed to track repeat sales, such as the Federal Housing Finance Agency (FHFA) or S&P/Case-Shiller home price indexes, in that median home price can be strongly influenced by the mix of houses sold in an area.