During the boom the mantra was, buy more, build bigger and you’ll make more.
In other words why mess around with a $500k deal that you could maybe turn into $750k when you could do a $2.0mil deal and turn it into $3.0mil+. And it’s all borrowed money anyway, so what’s to worry.
It sounded good at the time but since then most of the $2 mil+ spec deals hatched during the boom haven’t panned out. As a matter of fact I can’t think of even one that has panned out.
Three homes listed at $2mil+ have gone to contract this year and so far it doesn’t look very promising.
The 1st of the specs to contract this year was 7417 N Secret Canyon Drive Tucson, AZ 85718 (listed by Long Realty) It debuted in 08 at $4,500,000 and after dropping to $2,995,000 it went to contract in March. Well OK, $4.5 to $2.9, that’s a big cut but it’ll go for $2.6 or $2.7, eh. Oh yeah, it closed last month for $2,050,000 - 45% of its original asking price - Plus the cost of carrying it for 4 years, oye!
1714 E Barrel Cactus Court Tucson, AZ 85718 (listed by Russ Lyon Sotheby's Int Realty) the 2nd of 3 homes listed at $2 million+ to go to contract this year was reported as PENDING today. The PENDING status indicates that all contingencies have been met, and the deal is more or less a sure thing, and carelessly coasting toward close of escrow. Barrel Cactus, which I’ve mentioned a few times in the past > HERE & HERE < is a 2009 built spec that was first listed for $3,995,000 in 09. And after 3+ years and a few cuts it was reduced to $2,495,000 this April and went to contract in May. It hasn’t closed yet so we don’t’ know the accepted price. The investors paid $1.3 for the lot alone in 07, and that was before doing any site prep. Even at $2.4 they’d be out a bundle. A big bundle.
The 3rd high-end spec to see action this year went contract just last week in Finisterra listed at $3,500,000 after starting out in Feb 2010 at $4,200,000. Not so bad, considering. But, at what price did it go to contract. We’ll have to wait and see. 6151 E Finisterra Tucson, AZ 85750 (listed by Long Realty)
Here’s a few from yesteryear;
The spec at 2162 E Sentry Ridge Court sold for $1,500,000 this past March from a $1,550,000 list price. But it took four years and was reduced from $2,950,000.
Another Pima Canyon spec, 7828 N Ancient Indian Drive, sold in March 2011 for $1,660,500 after starting out in January 09 at $3,295,000.
And another, 2123 E Sentry Ridge Court, dropped from $2,750,000 to $1,850,000 before accepting $1,517,250 after 4 long years.
1813 E Sahuaro Blossom Place, also a Pima Canyon spec, started at $3.2 in 06 and ended at $1.9 four years later.
One of the early birds to the spec party, a La Quinta along Campbell Ave, started out in June 07 at $2,695,000 and didn’t sell until July 2010 when it finally got $1,600,000.
These big deals take time to pull together and build, 2 –3 years if all goes well.
And for many of them the boom was history by the time they arrived. The boom was short lived, but the bust has gone on forever. And it’s cut deeper and lasted way longer than anyone imagined. And what we’re seeing now, the crash of the most expensive specs, is the final collapse - the collapse of those who were able to hold out the longest, only to watch as the market for the most expensive homes continues to plunge.
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