In the Phoenix Housing Market, Can the “Typical” Family Buy?

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Home prices in the Phoenix area are rising at a rate that an industry data analyst has called “unsustainable.”

PHOENIX – Whether you are on the buy or sell side, the Phoenix housing market is hot. This is a trend that many places across the country are currently experiencing.

And with all of this demand for homes today, navigating the home buying process can be difficult, even for families. But is the current real estate market too hot and are the prices of “typical” families too high?

We spoke with a few experts to find out.

Does the “typical” family have a chance in today’s housing market?

House prices in the valley reflect the mercury on your temperature gauge at this time of year: both are high.

In fact, house prices in the Phoenix area are rising at a rate that an industry data analyst has called “unsustainable.”

Home values ​​are increasing at a rate of 3.1% every month, according to Tina Tamboer, real estate data analyst for the Cromford Report.

To put this in perspective, Tamboer said that 0.5 to 1.0% per month is a normal range for a home’s appreciation.

Soaring house prices in the valley are a problem of supply and demand, Tamboer says.

Population exceeds housing supply

“We have increased our population by 20% since 2010 and we have only increased our housing units by 11%,” Tamboer said.

Tracy Fitzgerald, real estate agent for The Noble Agency in Scottsdale, said the current population far exceeds the supply of homes.

“We have approximately 4.6 million people across Maricopa County. As of today, we have about 6,500 homes on the market, ”Fitzgerald told 12 News in an interview in July.

Calculate the affordability of a house

Kelly Zitlow, vice president of Cornerstone Home Lending, said there is nothing “typical” when it comes to home buyers.

“There is nothing general about this process,” Zitlow said. “Everyone has a unique imprint.

Every family’s situation is different based on monthly debt, credit scores, how much is saved for a down payment, and how much debt they are willing to take on, among other factors.

Still, Tamboer agreed to help calculate an affordable home based on median family income.

National Association of Home Builders tracks median household income and median house prices in the country’s real estate markets.

The Greater Phoenix area is mostly made up of Maricopa County, and NAHB data for the second quarter of 2021 showed the median household income to be $ 79,000.

RELATED: Is The Phoenix Housing Market Heading For A Crash In 2021? Experts say no and here’s why

He also calculated the median home price for the second quarter at $ 378,000, although that number rose to over $ 400,000 for the most recent month available.

In view of this, 12 News asked: Can the typical family in the valley afford the sale of a typical house?

According to Zitlow, Cornerstone uses a debt-to-income ratio of 45% to determine which loans to offer. This means that all debt, including car payments, student loans, and housing costs, must be less than 45% of gross income each month.

Using this guideline, a family with an annual income of $ 79,000 can pay up to $ 2,962.50 in debt. However, most families go into debt before housing costs.

According to Zitlow, the median monthly debt of an American household is around $ 1,000.

This leaves the median family earning the median income up to $ 1,900 for a house payment.

When that monthly payment is factored in with a 3.5% down payment and a credit score over 740 for the lowest loan rate, our mortgage calculator shows that, yes, a family with the median income could afford. the middle house for sale.

But how many homes at this price are actually for sale? This is another problem that potential buyers face.

RELATED: Valley’s Hot Housing Market More Prone to Scams, Attorney General Warns

Real estate agent Fitzgerald said a potential buyer would look in the remote Phoenix suburbs for homes in this price range.

“Oh, my God, there aren’t many that are below 400,000,” Fitzgerald said. “You’re going to look like Mesa, Apache Junction, Surprise, Glendale, possibly Gilbert, New River, Cave Creek.”

“If you really need a house and want to live here, you kind of have to take what’s available,” Fitzgerald said.

Buyers make multiple offers, usually above the list price

Realtor Fitzgerald and Lender Zitlow, who often work with potential buyers, try to mentally prepare their clients to write lots of offers and expect rejection in this competitive marketplace.

“You can go anywhere from $ 25,000 to $ 75,000 above the list price, believe it or not,” Fitzgerald said, adding that she regularly resorts to showing clients’ homes via FaceTime, telling them that they might need to write an offer without ever having seen the house in person. “I think it’s the buyers who are really disappointed and don’t know what they’re up against. This is where they can get really discouraged, and sometimes they end up leaving saying ‘I can’t buy here, I’ll go somewhere else.’ “

There are, however, success stories. Zitlow and Fitzgerald recently teamed up to help Taylor Richison and his girlfriend buy Gilbert a house. They wrote offers on six houses and eventually got one accepted.

“At first we knew we probably had to make a few offers,” Richison said. “But still, when you make that first offer for the house, you really get hooked. You are really turned on thinking that you are going to get it; was certainly not the case.

Richison said the low point in his home buying experience was to offer $ 60,000 above the list price and come away empty-handed.

“The owner came back and said it wasn’t even a high enough bid to counter. That’s when it started to get a little stressful thinking we weren’t going to be able to find [a house]”Richison said.

Richison and his girlfriend have incomes above the median household income, but Zitlow still wants potential buyers to know there is hope.

“I think people come to us and they’re, like, deflated before they even start, because of what they read on the internet or who they talk to,” Zitlow said. “We just have to make sure that we educate people, flow to people, if they decide it’s not the time to buy, then too bad, but I don’t want them to make that decision on the wrong information base. “

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