New industry and growth in population and economy have helped make Tucson, Ariz., the fastest-rising city on the Mortgage Bankers Association's Hot Mortgage Market Index.

The ranking, which gauges the potential for mortgage market opportunity in 80 metro areas, put Tucson at the 13th spot, up from 54th in 1997. Brian Carey, economist for the association, said the gain is directly attributable to population and household growth rates.

"The homeownership rate is 54.4%, which is relatively low," Mr. Carey said, "but Tucson is a retirement area that may be choosing the apartment market instead of buying."

With a consistent decline in interest rates, the potential for 45.6% of the residents to buy increases dramatically.

Local lenders cited plenty of home construction in the area and say an increase in employment means more demand for homes.

"New industry has been moving here, because our local government is very pro new business, giving them things like tax breaks," said Brian W. Prentice, vice president of Clearwater, Fla.-based Market Street Mortgage Corp., which lends in Tucson. "We had a lot of renters that were sitting on the fence about homeownership and decided to buy when the rates dropped."

Connie St. John, spokeswoman for BankAmerica Mortgage, Charlotte, N.C., said start-up and established companies have generated 10,000 new jobs and $254 million in total wages for Tucson over the last five years.

Jason Altman, economist for the National Association of Realtors, said Tucson's ascent reflects a long-term trend of migration from the Northeast and the Midwest to the Southwest.

Tucson is "very much above average population and employment growth and probably will be for the next five to 10 years," Mr. Altman said. He said the 8% appreciation rate in Tucson housing prices in the second quarter was much higher than the national average.

Sherrie Liebert, branch manager in Tucson for Norwest Mortgage Inc., said a lot of people opt to buy second homes in the area and winter there because of the warm climate. She said the average mortgage for 1998 has been $102,000, and the average home cost $120,000.

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