New starter homes make a comeback in Tucson

For Tucson residents priced out of today’s housing market, smaller homes are beginning to return to new developments. KB Home is offering two-bedroom, one-bath models starting at $249,000, including at Saguaro Haven near West Valencia Road and South Camino de la Tierra. The homes are aimed at first-time buyers and empty-nesters who want to downsize, at a time when the average price of a newly built home in the Tucson market is more than $440,000.

The models range from 850 square feet to 1,700 square feet and are available in several KB Home communities across the Tucson area. Their return reflects a shift in what builders see as a changed market. Higher home prices and interest rates have kept many potential buyers from purchasing, while smaller floor plans can reduce the overall cost of ownership. The designs also use open layouts and fewer hallways to make limited square footage feel more functional.

Amy McReynolds, president of KB Home’s Tucson division, said prospective buyers often begin with an idea of how much space they need, but the smaller models can provide a way to purchase a home and begin building equity. The company has remained among the five largest homebuilders in the Tucson market based on new permits and sales. Its decision to offer smaller houses suggests builders are responding to buyers who may be able to afford a lower-priced home but cannot stretch to the larger designs that have dominated new construction.

Saguaro Haven has drawn recognition from the Southern Arizona Home Builders Association. David Godlewski, the organization’s president, described the community as a strong example of planning and construction for families and first-time buyers. He also connected the project to a broader local challenge: Tucson needs more starter homes, but it also needs more housing overall. In his view, policies that encourage construction and remove barriers can increase both inventory and affordability.

The shortage of starter homes is not limited to Tucson. Across the country, newly built houses have grown larger, and more than half of new homes in recent years have had at least four bedrooms. Local zoning rules, including minimum lot sizes and requirements for off-street parking, have helped make larger footprints more practical for builders. Buyer preferences have also played a role. Younger buyers once commonly purchased a small home in their 20s and planned to move into a larger one later, but the average first-time buyer is now nearing 40 and may be looking for a first home that can also serve as a long-term residence.

The traditional path into homeownership has been further complicated by the limited supply of existing homes. Homeowners who bought mortgages at much lower interest rates are staying put longer, leaving fewer properties available for people entering the market. In earlier decades, homes became available to first-time buyers when owners moved to larger houses or retired and downsized. That flow has slowed, increasing pressure on builders to create more attainable options.

Prices show how close the new and existing home markets have become. During the first half of the year, the average resale price in the Tucson area was $433,305, compared with $441,866 for a newly built home. Although the difference is relatively modest, the figures represent averages and do not mean every smaller new home will be available at the lower end of the market. KB Home’s $249,000 starting price places some of its smallest models well below those averages, although the final cost of a home can vary by location and features.

Local housing analyst Jim Daniel of R.L. Brown Reports expects the Tucson region’s new home market to outperform 2025 this year based on the number of permits being issued. He said population and economic growth are creating unusually strong conditions compared with many other markets, while cautioning that the industry needs to monitor the changing marketplace and adjust rather than assume demand will continue without limits. For buyers, that could mean more choices, but it does not eliminate the challenges created by interest rates, income levels and monthly payments.

Builders are also changing the types of homes they offer. In addition to smaller detached houses, the market is moving toward more attached housing, including townhomes and duplexes, and toward designs with carports instead of two-car garages. Tucson and Arizona have relaxed some restrictions on adding density in urban areas through townhomes, duplexes, triplexes and fourplexes. A state law that took effect this year requires only one off-street parking space per unit. Those changes, combined with the return of compact starter homes at communities such as Saguaro Haven, could give Tucson more ways to serve first-time buyers and downsizers as the region continues to grow.