But move fast to grab a bargain

Meghan E. Moravcik
The Arizona Republic
Feb. 11, 2005 12:00 AM

When Cindy Kovack put her house on the market over Thanksgiving weekend, she got a big surprise. It sold in two weeks.

She rushed to find a home to buy in central Phoenix, the only area she was interested in living in, but quickly realized how much prices had soared since the last time she had been looking to buy.

“I looked at a house two years ago that was selling for $129,000,” she said. “This one was $229,000. Then I realized it was the same house.”

That’s when she started to panic.

“I started worrying about the interest rates, that they were going to spike,” Kovack said. “It gives you a sense of panic.”

But thanks to the so-far stable interest rates, Phoenix homes have remained affordable despite the heightened prices, said Jay Butler, director of the Arizona Real Estate Center.

The center recently released figures about the affordability of homes in metropolitan Phoenix in 2004. The figures are based on price, household income and interest rates.

The study puts the city’s resale affordability index at 129 and the new-home affordability index at 109. This is good for buyers, because 100 is considered the point at which the typical home buyer, with the current median resale price and household income, can afford a median-priced home.

The numbers are down from last year, when the resale affordability index was at 141 and the new-home affordability index was at 119.

“Overall, the housing in Phoenix is affordable,” Butler said. “There are pockets that are very affordable and pockets that are very expensive. It’s a wide mix of things.”

Tom Bryant, a Phoenix Realtor with Realty Executives, said there is still affordable housing in the city, but you’ve got to be willing to move quickly.

That’s how Kovack finally snagged her new home. She went to the open house on Jan. 30, made an offer and the deal was approved Feb. 2.

Many have the same fear Kovack had – that interest rates are going to go up dramatically, Bryant said.

“There’s a lot of hand-wringing going on in the Valley,” he said. “(Phoenix) is still more affordable than most comparable cities. But if we saw interest rates go up dramatically, you’d see a pressure on affordability.”

Valley’s sagging affordability still broke records

Catherine Reagor Burrough
The Arizona Republic
Feb. 2, 2005 12:00 AM

It hasn’t been this difficult to afford a used home in metropolitan Phoenix since 1990.

Rising Valley home prices continue to outpace income gains, making it tougher for buyers to find houses that don’t stretch their budgets.

The area’s housing affordability crunch will likely worsen this year when interest rates finally start to climb. If home prices continue to increase, the affordability crunch could become more serious.

The reading on a key affordability index for existing homes published by Arizona State University’s Arizona Real Estate Center fell to 114 at the end of 2004, its lowest level in 15 years.

“Interest rates were stable, but monthly payments went up with prices,” said Jay Butler, director of the Real Estate Center.

The median price of a used Valley home climbed 22 percent during 2004 to hit a record $190,000 in December, according to the Real Estate Center. Easing the crunch a little was a drop in the average mortgage rate for Phoenix-area home sales. It went from 5.7 percent in 2003 to 5.5 percent last year.

ASU’s affordability index measures whether a typical buyer can afford a median-priced house at the prevailing interest rates. An index value of 100 or higher means the average buyer can afford a house. Anything below 100 means a city’s typical household can’t afford one of its average homes.

The index is based on Greater Phoenix’s median household income, the area’s median home price and the average interest rate. Overall, Valley household incomes inched up less than 2 percent to reach $49,500 last year.

Rising values are good news for sellers but not for buyers, especially first-timers who can’t afford $50 to $100 more a month that higher prices and interest rates can tack onto a mortgage payment.

But despite the Valley’s sagging affordability, new- and used-home sales broke records in 2004.

Out of state buyers are pushing sales and prices, say real estate agents and analysts. Investors from pricier housing markets such as California, the East Coast, Chicago and Las Vegas bought a record number of Valley houses in 2004, according to property records.

In Phoenix, new home prices are typically higher than used home prices so that index is always lower.

The median price of a new Valley home hit $211,640 in December, a 19 percent jump from January of last year. ASU’s new home affordability index fell to 102 last year, after hitting a 17-year high of 113 in both 2003 and 2002.

Despite the run up in metropolitan Phoenix home prices, the Valley is still considered relatively affordable by national standards. The median U.S. existing home price reached $189,000 in December, according to the National Association of Realtors.

To keep metropolitan Phoenix’s existing home affordability index below 100 during the first part of this year, interest rates can’t climb above 6.12 percent and prices must flatten out.

Housing affordability varies by Valley city because of different median home prices and incomes. Gilbert has high home prices but the town’s median household income is also higher. For example, the resale index in Gilbert is 146 because the area’s $205,000 median used home price is offset by an almost $75,000 household income.

Avondale has a resale index of 132 due to a median used home price of $163,000 and a household income of $53,640.

Scottsdale is the least affordable market for both new and used homes. Its resale index is 65 because of a $385,000 median used home price and a household income of only $62,700. Its median new home costs $569,095, which gives it a rating of 44.