Record low inventory and high demand have caused home prices to skyrocket by 28% in 2021, leading to an affordability crisis in Arizona’s housing market. It’s not just those looking to purchase, but those looking to rent too; rents were up 20% in 2021. According to the National Low Income Housing Coalition, Arizona ranks the 3rd worst for affordable housing.
AFFORDABILITY
So, where does this leave those looking to purchase a home in 2022? As of February 3, 2022, there are 2835 active single-family homes in Maricopa County. That, by the way, is extremely low compared to the 7650 we had in 2020.
If you currently fall into Arizona’s median household income of $79,000, plan on putting down the minimum 5%; with $1000 of monthly debt, you can afford a $325,000 mortgage or a payment of $1780 per month. There are currently 115 homes under $325,000 on the multiple listing service. So this means 50% of Arizona Households can only afford 5% of the homes for sale.
1 of 115 homes available / $325,000 home in Glendale / 3 bedroom, 2 bath, 1200 SF, built in 1940
To afford a median-priced home in Maricopa County (Phoenix, Scottsdale, Glendale, Mesa, Gilbert…) of $485,000, you would need a household income of $102,000, assuming everything else remains the same. You could afford 50% of the homes on the market at this price point.
1 of 2500 homes available / $485,000 home in Mesa / 3 bedroom, 2 bath, 1804 SF, built in 1972
WHAT IS ARIZONA DOING ABOUT THE HOUSING ISSUE?
Arizona has been tracking the affordability and supply issue for some time, and there isn’t a quick fix to the problem. To fight affordability, wages need to increase; since 2015, wages have only increased 13% while rents are up 40% and houses 65% over the same period. Like many states, Arizona has a housing supply issue; according to some experts, it’s estimated that Arizona needs 150,000 single-family homes today and an additional 100,000 rental units. At our current build rate, the supply issue could take five years to get back to normal. Arizona is working with builders to build more affordable housing by offering tax credits to offset development and building costs to solve these complex issues. They’re also changing zoning to increase building density and allotting more land dedicated to low-income housing.
WHAT CAN YOU DO?
With inventory so low and affordability getting worse, what are your options?
First, if you’re able to spend $485,000 or more, don’t wait. Affordability will worsen with rising interest rates; the Fed plans to increase rates three times in 2022, starting in March. Your housing options aren’t getting better either; the inventory appears to be shrinking day by day.
To avoid getting into bidding wars, find homes before they hit the market. Talk to your agent about looking for off-market properties.
If you’re NOT in a position to spend $485,000 or more, it will be challenging to find a single-family home. You may want to consider these options:
Consider Alternatives
Could a condo, townhome, or manufactured home fit your needs if a single-family home doesn’t work?
For example, It’s possible to purchase a new 1600SF manufactured home in buckeye on an acre for less than $300,000.
Make More Money
Ask for a raise; a raise can increase your purchasing power right away! This is your only option for a quick fix. Otherwise, it may take up to two years to add additional income.
Partner – Up
You might have to purchase a home with a family member or friend to increase your purchasing power.
The real estate market has NO indications of changing to a buyers market anytime soon. With record low housing inventory not expected to change for the next five years and mortgage rates on the rise, now is the time to buy if you can afford it. Don’t let the Arizona housing market leave you behind!