Here’s how much a starter home costs in Phoenix

It’s cheaper to buy a typical U.S. starter home now than it was last year, according to an analysis by the real estate company Redfin. But in Phoenix, prices remain a stretch for potential homeowners.

Buyers need to earn $77,000 a year to purchase an average $250,000 starter home in the U.S., according to Redfin. That’s down 0.4% from last year and is the first time starter homes have gotten cheaper since August 2020, when mortgage rates were nearing their record low.

The construction of new affordable homes in metro areas across the country likely forced prices down, said Daryl Fairweather, Redfin’s chief economist. But Phoenix wasn’t a part of that national trend.

“Phoenix is unaffordable,” Fairweather said.

A median starter home in Phoenix costs $324,940 in 2024. That number hasn’t moved much in the last year, and it’s still out of reach for many Phoenix buyers. To spend the recommended 30% of their monthly income on mortgage payments for a starter home, Valley residents must make $97,143 a year.

That’s nearly $8,000 more than the estimated median yearly household income of Phoenix residents. First-time homebuyers in the Valley at that income level must pay more than 32.6% of their monthly income on their mortgage.

This presents potential Phoenix homeowners with a dilemma.

“They either need to overextend themselves in areas to be able to afford a home, or they would have to continue renting,” Fairweather said. “They may be chasing housing affordability for a long time if they end up renting and their rents keep going up.”

There is some good news, though. Fairweather said Phoenix is “becoming a little bit less unaffordable.” Mortgage rates have started to come down, from a September 2023 peak of more than 7% for a new 30-year fixed-rate mortgage to about 6.6% today.

But the road from “less unaffordable” to “affordable” is a long one.

The Valley faces several housing challenges. Water scarcity has restricted housing development, while the area’s urban core lacks high-density housing. Phoenix also is becoming a popular migration destination for out-of-state residents, including snowbirds, Californians and remote workers, Fairweather said.

Those transplants may be able to afford homes, but longtime Phoenicians can’t.

“The homes that are getting built, they might be priced at a point that, although is unaffordable to current people living in Phoenix, it might be affordable to people who are moving from, say, Los Angeles or San Francisco,” Fairweather said. “Or from some of these other higher income metros.”

So, if you’re in Phoenix and looking for your home, limber up. You might need to stretch. According to Redfin’s metrics, only 9% of homes in the Valley are available to residents making the median home income of $89,287 a year.

And if you are intent on buying, consider how long you plan to stay put. Extending yourself financially for a starter home might put your forever home beyond your grasp.

“If you’re only going to stay in the home for less than five years, you’re probably better off renting. But if you’re going to stay long term, it's probably worth it to lock in,” Fairweather said. “Even if you’re stretching yourself a little bit.”