Home sales continue apace; Despite record volume, affordability remains a concern for many Arizonans

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The volume and value of new homes sales continues to rise, according to recent reports.

However, the majority new houses are aimed at affluent buyers, leaving many in the work force struggling for affordable options.

According to a joint report issued Aug. 23 by the U.S. Census Bureau and U.S. Department of Urban Development, new homes sales in July continued apace with 53,000 units sold, an increase of more than 4% over July 2018.

Nationally, the median sales price in July was $326,400 nationally with an average sales price of $385,000.

The number of homes sold and the cost to buy them are now at levels not seen since the peak of the real estate bubble before the Great Recession in 2006.

That threshold was met in the first quarter of 2018 and has only continued to climb since.

The numbers locally are lower (but not much), with an estimated median sales price of $275,000 and an average sales price of $346,547 in the first quarter of 2019, according to data published by the Arizona Regional Multiple Listing Service, Inc.

Affordable housing, as defined by the Census Bureau and other agencies, should cost no more than 30% of gross monthly income  — this amount includes associated costs for homeowners and utilities for renters.

Based on the bureau’s most recent data from 2017, the median per capita income in Maricopa County is $30,186 annually or $2,515 per month  — meaning, half of county renters would need a monthly individual housing cost of $750 or less to live comfortably.

The median rent county wide is $1,033, representing a gap of $279 for individual renters.

The median household income of $58,580 constitutes a monthly income of $4,881 in the county, which based on the 30% rule, sets the affordability bar at $1,464 per month for housing.

The median monthly cost to own in the county is $1,449 for households, which are comprised of an average of 2.7 persons in the county.

According to the ARMLS report, the median new home sales price in the county in the first quarter of this year was $275,000, which  — based on a 20% down payment and a 3.7% interest rate  — constitutes an estimated monthly payment of $1,258.

Adding the Census Bureau’s estimated monthly household owner cost of $436, the estimated monthly cost to maintain a home sold at the median price is $1,694  — exceeding the recommended monthly household housing cost by nearly $230.

However, this cost gap is based on those earning at the middle of the pack  — for those earning less, the situation is more dire.

According to the bureau, more than 1,068,000 of the county’s 7,717,000 residents live in poverty  — this group represents nearly 14 percent of county residents.

For an individual under age 65, this represents an estimated total monthly income of less than $1,088 per month; for a family of three, the poverty line hovers around $1,600 in gross monthly income.

To be affordable, housing would need to cost no more than $326 monthly for an individual or $491 for a household of three living below the poverty threshold as defined by the bureau in 2018.

High demand, low supply

While many Valley residents are already struggling, the purchase price of the majority of new houses far exceeds what is affordable.

Of the 53,000 new homes sold nationally in July 2019, only 12.2% cost less than $200,000; so few sold for less than $150,000, the bureau reported no specific number, indicating merely that fewer than 500 homes were sold for less  — or fewer than 1%.

These numbers are consistent with total yearly home sales in 2018 and 2017, with only 11.6% and 12.9% percent of new home sales respectively falling below the $200,000 mark.

The same supply disparity drives the apartment market as well, where one expert suggests an equal portion of new units will be targeted to high earners.

Roland Murphy, director of research for the ABI Multifamily Apartment Brokerage & Advisory Firm in Phoenix, spoke to Daily Independent about his predictions for new apartments to be built in 2019.

He said most new units will fall into the Class A category, which comprises luxury developments.

“In terms of affordable development, it’s going to be more of the same. Capital will flow to the highest-returning projects, and that will continue to be Class A,” Mr. Murphy said. “The demand is still there since we’re still under-building across all classes, and you get more bang for your inexpensive-to-borrow buck building luxury than workforce-affordable.”

His firm’s analysis points to record market growth, but with continued focus on luxury developments, with 6,000 to 9,000 new units predicted for delivery by the end of year based on ABI’s first-quarter data.

But most of those projects are high-rent, luxury communities.

“80 to 88% of new construction is Class A. The workforce affordable housing … with a rental point around $950, that’s not getting built pretty much at all,” Mr. Murphy told Daily Independent earlier this year.

West Valley market

The cost to buy a home in some West Valley communities is lower than in other parts of the county.

Looking at 20 ZIP compiled across parts of Peoria, Surprise, Sun City, Sun City West, Youngtown and El Mirage, an average of median sales prices was $243,000, while the average of average sales prices was $255,939.

Among the ZIP codes with the least expensive sales prices were 85351, where Sun City buyers paid a media price of $170,000 and an average price of $176,789.

The median tax value of homes there is $113,000 with a median income of $34,613, according to data published by the U.S. Postal Service.

In ZIP code 85335, El Mirage buyers saw a median price of $208,000 and an average price of $211,000 with a median home value of $95,600 and a median household income of $47,237.

By contrast, in ZIP code 85387, which encompasses Sun City West, the media home sales price in July was $290,000 with an average price of $325,937.

The median tax value is $270,100 for homes in the community, where the median household income is $58,416.

For comparison on the higher end of the market, homes in the 85377 ZIP, which includes the town of Carefree, the median price for the same period was $645,000 with an average price of $831,921.

The median home value there is $672,300 with an estimated household income of $70,625 annually.

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