Homebuyers maximize their buying power in outlying areas
How far out of the metro area are homebuyers willing to go to get an offer on a home?
A One Valley expert says homebuyers may have to look to outlying areas or create a larger household to afford today’s high house prices. Buckeye, Casa Grande and San Tan Valley are all places where home values are a bit more affordable than others, said Zonda housing analyst Steven Hensley.
But if you’re looking to live closer to the heart of the valley, be prepared to shell out a lot more money each month.
Indeed, in addition to soaring prices, higher mortgage rates are also reducing the purchasing power of Valley residents in the market to buy a home, he said.
Last week, Freddie Mac reported that the average rate on a 30-year mortgage rose to 5.11% from 5% the previous week. Average rates in recent months have risen at the fastest rate since 1994, the Associated Press reported.
The Chandler, Gilbert and downtown Phoenix areas are on the higher end of the spectrum, Hensley said.
“(There is) definitely a correlation between price and proximity to downtown Phoenix,” Hensley said.
For example, a 2,000 square foot house with three bedrooms and two bathrooms in Casa Grande costs $380,000, based on general averages of transactions made in 2022.
Another more affordable neighborhood is Maricopa – where homes cost around $395,000.
The same house in Surprise costs $100,000 more — at $480,000, according to the Zonda database. Want to live in Goodyear? A three-bedroom, two-bathroom house costs $500,000 there. Buckeye is the cheapest of the three West Valley towns where you can snag a home for $465,000, according to Zonda data.
About 75% of Arizona households would have difficulty buying a median-priced home in the state, according to a March report from the National Association of Home Builders.
The report presents data on how higher prices and interest rates affect affordability. The report was produced by Na Zhao, doctor in economics and housing policy for the association.
About 87.5 million households — representing about 69% of all U.S. households — are currently unable to afford a median-priced new home, according to the report.
The report provided price estimates for individual states and over 300 metropolitan areas.
A household in Arizona would need $102,987 in total income to afford a single-family home at the median price of $464,413, according to data from the National Association of Home Builders.
An estimated 738,906 Arizona households out of nearly 2.85 million can afford that median price, the data shows. That means about 2.1 million households cannot afford the median and 2,417 are completely overpriced, the data shows.
So what is the solution ?
Hensley suggests that larger households in the form of roommates or multiple people under one roof – such as multi-generational households – may become a “plausible solution” to the problem.
The average cost of a home in the Phoenix metro area is $569,800 based on March figures, said Thomas Brophy, housing analyst at Colliers in Phoenix.
The average mortgage payment for new sales of that average price is $4,203 per month based on an average 30-year fixed mortgage with an interest rate of 5.1%, he said.
The hike in interest rates by the US Federal Reserve appears to be dampening demand.
The National Association of Realtors recently reported that “existing home sales fell 2.7% last month from February to a seasonally adjusted annual rate of 5.77 million,” according to the new data.
Brophy said residents who decide to buy should benefit from locking in a monthly payment rather than having to deal with the problem of their fluctuating rent.
“It’s worth its weight in gold, don’t you think?” he said.