How far away from the metro area are homebuyers willing to go to get a deal on a house?
One Valley expert says homebuyers might have to look at fringe areas or create a larger household to afford elevated home prices these days. Buckeye, Casa Grande and San Tan Valley are all locations where home values are a bit more affordable than others, said Steven Hensley, housing analyst at Zonda.
But if you’re looking to live closer to the Valley’s core, be prepared to shell out a lot more money every month.
That’s because in addition to skyrocketing prices higher mortgage rates also are reducing purchasing power of Valley residents in the market to buy a home, he said.
Last week, Freddie Mac reported the average rate on a 30-year mortgage rose to 5.11% from 5% the previous week. Average rates in recent months are growing at the fastest pace since 1994, the Associated Press reported.
Areas in Chandler, Gilbert and downtown Phoenix are on the higher end of the spectrum, Hensley said.
“(There is) certainly a correlation between price and proximity to central Phoenix,” Hensley said.
For instance, a 2,000-square-foot three-bedroom, two-bathroom home in Casa Grande is $380,000, based on general averages of transactions that occurred during 2022.
Another more affordable area is Maricopa — where homes go for about $395,000.
The same house in Surprise goes for $100K more — at $480,000, according to the Zonda database. Want to live in Goodyear? A three-bedroom, two-bathroom home is $500,000 there. Buckeye is the cheapest out of the three West Valley cities where you can snag a house for $465,000, according to Zonda data.
About 75% of Arizona households would have hardships attempting to purchase a median-priced home in the state, according to a March report from the National Association of Home Builders.
The report shows data on how higher prices and interest rates affect affordability. The report was conducted by Na Zhao, doctor of economics and housing policy for the association.
About 87.5 million households — which represents about 69% of all U.S. households — currently are not able to afford a new median-priced home, the report said.
The report provided priced-out estimates for individual states and more than 300 metro areas.
An Arizona household would need $102,987 of total income to afford a median-priced single-family home of $464,413, according to data from National Association of Home Builders.
An estimated 738,906 Arizona households out of nearly 2.85 million can afford that median price, the data said. That means about 2.1 million households cannot afford the median and 2,417 are completely priced out, according to the data.
So what’s the solution?
Hensley suggests larger households in the form of roommates or more people under one roof — such as multigenerational households — may become a “plausible solution” to the problem.
The average cost of a house in metro Phoenix is $569,800 as of March numbers, said Thomas Brophy, a housing analyst at Colliers in Phoenix.
The average mortgage payment for new sales of that average price is $4,203 per month based on the average 30-year fixed mortgage with an interest rate of 5.1%, he said.
Raising interest rates by the U.S. Federal Reserve seems to be curbing demand.
The National Association of Realtors said recently that “existing home sales fell 2.7% last month from February to a seasonally adjusted annual rate of 5.77 million,” the new data said.
Brophy said residents who decide to buy should benefit from locking in a monthly payment rather than having to face the problem of their rent fluctuating.
“That alone is worth its weight in gold, don’t you think?” he said.
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