You now want a six-figure wage to afford a starter residence in Phoenix.

Phoenix, AZ, is a sunny, outdoorsy metropolis residence to famend sports activities franchises, spectacular vistas, and loads of golf programs. Nevertheless, Phoenix isn’t simply the guts of The Valley of the Solar; it’s additionally residence to a booming actual property market that’s seen important progress lately. 

For a lot of, shopping for a house in Phoenix is a dream come true, but it surely’s additionally essential to know the way it will impression your funds. From down funds to month-to-month mortgage funds, there’s rather a lot to know earlier than shopping for your first residence 

So whether or not you already stay in The Valley of the Solar or wish to relocate to the world, right here’s a breakdown of the earnings you’ll must buy your first residence in Phoenix.

Try our unique report for an in depth nationwide evaluation.

How a lot earnings do it is advisable purchase a starter residence in Phoenix?

The median sale value of a starter residence in Phoenix is $330,000. As a way to afford this, first-time homebuyers in Phoenix ought to make $101,321 per 12 months, up 6.6% from 2023. Nevertheless, the median earnings in Phoenix is $89,521, which means the everyday resident typically can’t afford a starter residence.

As anticipated, starter houses in Phoenix are far more reasonably priced than the typical residence (all value brackets mixed). As a way to afford any median-priced residence within the space, you’ll must make $121,368 (as of October 2023). 

Nationwide, you want an earnings of $75,849 to afford a typical starter residence, which prices a mean of $240,000. The common U.S. family earns an estimated $84,072.

First-time homebuyers’ information to the Phoenix housing market

Phoenix has been a preferred migration vacation spot for years amongst homebuyers in search of sunshine and affordability. However through the pandemic, the area noticed an explosion of progress and recognition, which has hardly slowed down. In actual fact, the town has constantly been the high vacation spot for relocating residence consumers. This inflow has boosted home costs by 29% since January 2021, from $325,000 to $459,000 in April 2024. Home costs have almost tripled up to now decade.

Local weather dangers are a significant concern for residents in Phoenix, although. The town is within the midst of a decades-long megadrought plaguing the Southwestern U.S., and lately hit 110° F for 31 days in a row. 2023 was additionally the town’s hottest and driest on report.These developments are anticipated to proceed as local weather change worsens.

The desert metropolis is residence to many world-class facilities situated all through its spread-out neighborhoods. Some in style neighborhoods in Phoenix embody Central Metropolis, Maryvale, and Ahwatukee Foothills. From the Phoenix Zoo and Heard Museum to South Mountain and Camelback Mountain, there are many causes to name Phoenix residence.

What does a typical down fee appear to be for a starter residence in Phoenix?

Listed below are some frequent down fee quantities for a typical $330,000 starter residence in Phoenix:

Down funds can vary from 0% to 100% of the overall home value, relying in your finances, mortgage sort, and long-term priorities. Whereas specialists have traditionally advisable budgeting for a 20% down fee, the rising price of houses and continued sluggish wage will increase has led to a 15% down fee changing into extra frequent. 

Some mortgage varieties permit for decrease down fee quantities. For instance, a Federal Housing Administration (FHA) mortgage requires simply 3.5% down, whereas the bottom attainable down fee for a standard mortgage is 3%. These quantities sometimes rely in your credit score scores, so consumers with increased credit score scores could qualify for decrease down funds.

What’s the typical mortgage fee for a starter residence in Phoenix?

The everyday month-to-month mortgage fee for a starter residence in Phoenix is $2,533. This assumes you set 3.5% down and have round a 7% rate of interest.

If this fee sounds too excessive, you possibly can think about renting an residence in Phoenix. The common lease value is $1,962, presumably making it a greater choice when you save for a down fee on a home. You too can use an affordability calculator to see what you may afford primarily based in your earnings and down fee.

What must you do subsequent?

When you’re out there to your first residence in Phoenix, it’s essential to know how a lot home you may afford. Take your annual earnings, credit score rating, the present mortgage charges, and native market developments to decide that works greatest for you.

From there, a Phoenix agent may help you navigate the whole residence shopping for course of and supply helpful native experience. To study extra about find out how to purchase a house, take a look at Redfin’s First-Time Homebuyer’s Information.

Methodology

Redfin divides all U.S. properties into 5 buckets primarily based on Redfin Estimates of houses’ market values. There are three equal-sized tiers, in addition to tiers for the underside 5% and high 5% of the market. Redfin defines “starter houses” as houses whose sale value fell into the Fifth-Thirty fifth percentile of the Redfin Estimate tier. 

We calculated the annual earnings wanted to afford a starter residence by assuming a purchaser spends not more than 30% of their earnings on housing funds. Housing funds are calculated assuming the client made a 3.5% down fee and in addition take a month’s median sale value and common mortgage-interest fee under consideration. 

The nationwide earnings information is adjusted for inflation utilizing the Shopper Worth Index. 2024 earnings is estimated primarily based on projections from the U.S. Census Bureau’s (ACS) 2022 median family earnings utilizing the 12-month shifting common nominal wage progress fee. The speed was compiled from the Present Inhabitants Survey and reported by the Federal Reserve Financial institution of Atlanta.

We assume housing funds embody the mortgage principal, curiosity, property taxes, householders insurance coverage, and mortgage insurance coverage (when relevant).

All information sourced February 2024 except in any other case said.