Increases in home prices in Tucson aren't keeping with the record-setting pace statewide but that's probably good news, say a local real estate executive and economist.

Second quarter data from Fannie Mae, released last week by the Office of Federal Housing Enterprise Oversight, showed Arizona leading the nation in home price appreciation - up 34.5 percent over a year ago. Most of that was driven by rising prices in the Phoenix area, which saw a 37 percent increase.

Statewide, Arizona is on track to see home prices appreciate by more than 48 percent by year's end.

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Tucson's average home price increase from year to year was a more moderate 25.1 percent - a big jump by many standards but no so much compared to the rest of the state.

The average single-family home in the Tucson area is now priced at $281,426. Based on the way things went the first half of the year, Tucson home prices are on pace to rise by 31.8 percent by the end of the year when the average home will be $320,076.

Daniel Carapelluci, president of the Tucson Association of Realtors, isn't sure why Tucson's home prices are lagging other parts of the state but says "our primary strategy at the beginning of the year was to do something to provide for and preserve the supply of affordable housing. The fact that Tucson's average housing cost isn't going up quite as fast means we're going a ways toward achieving that goal."

While nobody would want to see prices going down, Carapelluci said it's important to preserve a range of homes and prices, to reach the broadest possible number of potential buyers. The easiest way to do that is by guaranteeing that the supply of new homes stays abundant and affordable.

"It's the wonderful guiding light," he said. "We'll always want affordable housing for every strata of our society so that as many people as possible have the opportunity to own a home."

Even if prices don't keep page with Phoenix, Carapelluci warns it's not likely they will get any cheaper.

"Everybody talks about a bubble, but in Tucson, we don't have one," he said. Instead what Southern Arizona is experiencing is the effect of a growing economy and a climate that keeps people moving to Tucson from the rest of the nation.

"It's a wonderful world in Tucson," he said. "People see the place and want to move here, and when they come, they don't leave. That creates demand. People will stop coming here when they turn the sun off. More people moving here will mean more competition. That's going to mean higher prices for the homes that are offered for sale. It's simple supply and demand."

Marshall Vest, director of economic and business research at the University of Arizona's Eller College, is more cautious in his outlook.

He says what's happening in Phoenix and Tucson is the latest phase of a boom that started on the California coast and moved inland to Las Vegas.

"During the second and third quarters of last year, Las Vegas housing prices went up 47 percent, then 73 percent, but it slowed down during the fourth quarter and now the increase is in the 10 to 12 percent range," he said.

As progression continued, the peak of the boom is now in Phoenix, Vest says.

"Will we see a similar run-up in Tucson? It's a logical extension of the process, up to now," he said. "Investors are looking for undiscovered markets. They've discovered Tucson."

The boom could continue moving inward from the coast, or it could end.

"At some point, the process that leads to frenzy has got to come to an end," Vest said. "Right now, in the balance between greed and fear, there's a lot of greed and no fear. That will change."

When it does, higher home prices in Tucson may have a dramatic, and possibly negative, effect on the city, which has been the beneficiary of a steady supply of immigrants from the upper Midwest.

"We have people getting ready to retire, people who are buying a second home or a vacation property," Vest said.

As prices go up, affordability becomes a problem. "This could change the dynamic of where Tucson's future residents will come from. We could see more new residents from California and fewer from the Midwest. We could also see people decide to sell out of Tucson, to cash out and move back to the breadbasket, where their dollar goes farther.

He said, "Tucson is becoming an exclusive place, and that's not a good thing. People are being excluded. Those who don't already own a house will find it hard to live here."

Philip S. Moore may be contacted at pmoore@azbiz.com or at (520) 295-4238.