Way too long ago, a regular reader here (Maricopa Mark ”“ Check out his blog!) asked my opinion on the entry level housing market in the Phoenix area. Sorry it took so long Mark, but here you go”¦
With the rapid increase in home values across the Valley last year (an AVERAGE of 48%), many feel that the first time/entry level buyer has been priced out of the market. And sadly, there is some truth to that. I don’t believe any market can experience 40 ”“ 60% appreciation rates without driving some (perhaps many) buyers out of their range of affordability.
That said, there ARE still some places in the Phoenix area where it’s possible for the first-time/entry-level buyer to purchase a decent home.
One place for the entry-level buyer to look is the condo/townhome market. While condos have appreciated significantly, there are still many very nice condos available in the 120 ”“ 180K range. They did not accelerate at the rate single-family homes did. Condos have their advantages and disadvantages. Some feel they are no more than “glorified apartments”. However, they DO provide the advantages of ownership over renting, and they do appreciate over time. There is something to be said about not having to worry about maintaining a yard, or being responsible for exterior and roof maintenance. In the boom of last year, many developers were converting apartment complexes to condos, and with the demand slow-down, there are some stellar deals available in the condo/townhome market.
If the entry-level buyer is set on a single family home, they may need to consider looking outside of the immediate Phoenix metro area. Homes in the Casa Grande/Florence / Eloy “triangle” are still quite affordable. (for details on the area, look to our main site here). Located down I-10 about 30 miles south of Chandler, the area is undergoing a lot of development, it’s not really that far out, and a buyer can get significantly more home for the money than they can in closer in to the Phoenix area.
Apache Junction and El Mirage are also areas where there are some excellent buying opportunities. Both of these areas suffer from an “image problem” that is mostly a hold-over from several years ago. Both have recently greatly approved their infrastructure and the local governments are doing good things to increase the “quality of life” in these areas.
Closer to Phoenix (right smack in the middle of it in fact) is the “Baseline Corridor”. This area has seen explosive growth and re-development lately. And while it’s beginning to get pricey, there are still some excellent entry-level opportunities there, particularly in condos and townhomes.
Finally , there are manufactured homes. I’m not talking mobile homes (though that’s also an option) but manufactured homes that are actually built on a foundation. Many of the newer models of manufactured homes are beautiful, and it’s virtually impossible to tell the difference between them and “stick built” homes. I’ve seen 2,000 square foot manufactured homes selling for less than 180,000 ”“ you could easily pay double that for a site built home. The biggest problem with manufactured homes is that they don’t appreciate like a site built home. In fact, unless meticulously cared for, they can easily depreciate over time. This can be off-set by appreciation in the land they sit on, but some manufactured homes are built on leased land ”“ which negates any potential appreciation in the land. Another significant issue is that it isn’t easy to get financing on a manufactured home, and it’s virtually impossible to get a low/no down payment loan on one. But they do offer a viable alternative to site built homes.
So the bottom line is that entry-level homes ARE available. One may have to re-think exactly what it is they want or need (and there is a BIG difference between “wants” and “needs”) including WHERE they want to live. But it can be done, often without sacrificing all that much.