As the nation’s fifth-largest city, Phoenix has long been known for its year-round sun and beautiful desert landscapes. But now the Valley of the Sun is gaining attention for an altogether different reason – the challenging real estate market for first-time buyers.
As prices continue to rise and housing availability becomes increasingly scarce in the Metro Phoenix area, those looking to get on the bottom-rung of the housing ladder have been left short of options and often trapped in rented accommodation.
However, new home communities have been making an impression on those looking for high-quality housing at an affordable price point. With more affordable sale prices, attractive finance options, and well-equipped amenities, these developments are helping change the narrative for increasingly desperate buyers.
The Phoenix First-Time Buyer Crunch
There’s been a quiet but unmistakable crunch in the Phoenix housing market where first-time buyers are concerned. Usually armed with a fixed deposit, limited income history, and a still-climbing credit score, houses in the Phoenix metropolitan area have slowly but surely become affordable for many first-time buyers.
Just look at the figures from last year alone. House prices in areas like Tempe, home to Arizona State University, just jumped 5.1%, adding an average of an extra $24,000 to each home there. Nearby Tucson and Phoenix itself aren’t far behind either – with hikes of 3.1% and 2.3%, respectively.
Worse, housing availability has plummeted. Chandler, Gilbert, and Mesa have all seen dramatic reductions in housing inventory, with some drops exceeding 55%.
These local real estate trends have left buyers looking to buy their first property clutching at straws. The choice has been stark for many: to settle for something much less desirable or stay stuck renting while inflation erodes down payments and house prices continue to increase.
That’s where new home communities have been bridging the gap, offering attractive homes in amenity-rich communities at a price they can still afford.
How New Homes Communities are Changing the Narrative for First-Time Buyers
Despite what many would perceive as turmoil in the Metro Phoenix real estate market, there has been an injection of hope for many first-time buyers in the form of new home communities.
Often developed with young families and first-time buyers in mind, the homes in these communities blend quality with affordability, paving the way to homeownership.
For many, the appeal is in the fresh start. These brand-new homes, complete with modern appliances and integrated smart home technology, promise contemporary living without the associated price tag. There’s no longer a need to break the bank for open-concept and energy-efficient living.
And these communities are chock-full of amenities. From community swimming pools to fitness centers, parks, hiking and biking trails, and dog parks, every need has been catered for without even leaving the neighborhood.
You might be forgiven for thinking there’s a catch. For instance, maybe these communities are way out of town, helping keep costs down. But that’s not the case. New home builders like LGI Homes and others are offering new homes in desirable suburbs, including Glendale, for as little as $375,000. And these aren’t pokey residences, either. They feature three bedrooms, two bathrooms, a double garage, and a suite of upgrades included as standard.
When stacked against the alternative, it’s no wonder so many first-time buyers are leaping at the chance to secure these brand-new homes while they still can.
Many First-Time Buyers Waking Up to Financing Possibilities
Another reason so many first-time buyers are drawn to these new homes is because they are being given a better understanding of their finance options. These communities often have on-site mortgage and finance teams that educate first-time buyers on their options.
While many have thought homeownership a distant dream, when actually made aware of the help available, some realize not only can they afford a new home, but their monthly payment may even be less than they currently pay in rent.
For instance, in many ways, Federal Housing Administration (FHA) loans are a perfect match for first-time buyers, with smaller down payments, lower credit score requirements, and more leniency on debt-to-income ratios. However, awareness about these programs has been lacking.
Now, armed with better information about loans backed by the USDA, VA, and more conventional lenders, many first-time buyers are heading into house-hunting confident they have what they need to secure their very own home.
Phoenix Housing Market Trend Towards New Homes is Reflected Nationwide
The housing challenges facing first-time buyers in Phoenix are far from unique. Across the nation, there’s a palpable housing shortage, with CNN putting the deficit as high as 6.5 million homes. In many places, it’s this shortage that’s driving up the prices and making the dream of homeownership unattainable.
But new homes, with their modern construction techniques, are keeping high-quality housing an affordable reality in many locations, including Phoenix. Texas-based LGI Homes and many other home builders are doing their bit to help lower the barriers to entry of one of the key tenets of the American Dream.
The statistics are already starting to trickle in regarding the new homes trend. Recent data from Freddie Mac has uncovered the sale of new homes as representing 15% of all home sales in the past year. That’s four percentage points higher than the historical average, and with a jump in new construction permits granted nationally in 2023, that figure is set to climb even higher.
In other words, it seems as though these new home communities springing up around the Metro Phoenix area are anything but a fleeting trend. They are an important piece of the puzzle in addressing the local and national housing challenges.
The Dawn of a New Era in the Phoenix Housing Market?
Just as is the case nationally, the Phoenix housing market is currently presenting its fair share of challenges for first-time buyers. But with their modern designs, affordable prices, and qualification for a vast array of financing, more and more buyers are taking the first steps toward homeownership in the Valley.
More than just a fleeting trend, the growth of these amenity-rich new home communities looks sure to plug at least some of the housing gap in Arizona, with many industry professionals hoping they can kickstart an uptick in housing availability. But it’ll be at least a few years before we have an idea of how successful they’ve been in that regard.
