Have we seen the last of the affordable starter homes in Arizona?
PHOENIX (AZFamily) — Adriana and Bradley Hill have been on the house hunt for months. They want to buy their first home.
“We got married last year, we got a dog and he wants space to run around, so we decided now or never,” Bradley said.
They’ve toured at least 20 homes and put in offers on three. They’ve been outbid three times.
“It feels a bit like a roller coaster because we get our hopes up, and then we put an offer on something, and then it goes away, and you’ve got to jump to the next thing already,” Adriana said.
“If it wasn’t for [her] calm demeanor, I feel like it would freak out every time,” Bradley added.
It’s a familiar feeling for people searching for a starter home. According to the National Association of Realtors, only 24% of buyers in 2024 were first-time buyers. That’s the lowest share in more than four decades of reporting. At the same time, the median first-time buyer age went up to 38 years old from 35 in 2023.
“Starter homes nowadays in the Phoenix market are harder and harder to come by. When you look at the median sale price, we’re somewhere around $450,000,” said Valley realtor Trevor Halpern.
The combination of rising home prices and mortgage interest rates has made it challenging for people who want to buy.
“Even with inventory going up, the number of homes that would be traditionally considered starter homes are really low,” Halpern said.
That’s shifting the perception of the so-called starter home for a lot of would-be buyers. “They’re looking at what would normally be the second or third home as their starter home because of price,” Halpern said. “Folks who used to enter the market and go, ‘Hey, we can buy a single property, standalone home, for $300,000 to $350,000, now they’re looking at $450,000, $500,000, $550,000, even $600,000.
“I can’t afford what [my parents] had at the age that I am today,” Bradley said. “You’re getting a lot less for more.”
Condos and townhomes are traditionally good options for first-time buyers. The price tag is lower, and the maintenance is typically easier to manage, but even condos are getting tougher to purchase.
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“If you’re going to use an FHA loan to purchase a condo, that entire complex has to be on the FHA approved list, meaning that condo community has to proactively as an association fill out the application and qualify for it,” Halpern said. “Most condo associations aren’t even aware of that and so they don’t go through the FHA qualifying process, thus eliminating the ability for buyers to come in and buy their own condos from them.”
In some cases, rising insurance rates also impact buyers’ ability to get loans on condos, as homeowners associations increase deductibles to keep monthly dues relatively stable.
“When the deductible is really high, it eliminates people’s ability to get financing. Freddie Mac and Fannie Mae have criteria that every condominium complex must meet, and if that deductible is too high, they say nope, we can’t loan money on this entire complex,” Halpern said.
There are numerous options to help first-time buyers, including down payment assistance, grants, and reduced mortgage insurance programs. Lenders and realtors can help buyers navigate the process.
The Hills’ wish list is modest. “A laundry room that’s an actual room and not just a closet,” Adriana laughed. “You would think that would be easier to find, but sometimes it’s not.”
The couple knows they’ll find something, and it’s fun to imagine what it will actually feel like when they do.
“Relief,” Adriana said. “Magical,” Bradley added.
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