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In the Valley's housing market, can the 'average' family buy a home?

Home prices in the Phoenix area are rising at a rate one industry data analyst called “unsustainable.”

PHOENIX — Whether you're on the buyer or seller side, the Phoenix housing market is hot. It's a trend that many places around the country are experiencing right now. 

And with all of this current demand for homes, navigating the home-buying process can be difficult, even for families. But is the current real estate market too hot and pricing out "typical" families?

We chatted with a couple of experts to find out.

Does the “typical” family stand a chance in today's housing market?

Valley housing prices mirror the mercury in your temperature gauge this time of year: both are high.

In fact, home prices in the Phoenix area are rising at a rate one industry data analyst called “unsustainable.”

Home values are rising at a rate of 3.1% each month, according to Tina Tamboer, a real estate data analyst for the Cromford Report.

To put that in perspective, Tamboer said that 0.5- 1.0% per month is a normal range for home appreciation.

According to Tamboer, the Valley’s skyrocketing home prices are an issue of supply and demand.

Population outpaces housing supply

“We grew our population by 20% since 2010, and we only grew our housing units by 11%,” Tamboer said.

Tracy Fitzgerald, a real estate agent for The Noble Agency in Scottsdale said the current population far outpaces the supply of houses.

“We have about 4.6 million people in all of Maricopa County. Right now to date, we have about 6,500 homes on the market,” Fitzgerald told 12 News during an interview in July.

Calculating home affordability

Kelly Zitlow, the Vice President of Cornerstone Home Lending, said there is no such thing as “typical” when it comes to home buyers.

“There's nothing that is general about this process,” Zitlow said. “Everybody has a unique footprint.”

Every family’s circumstances are different based on monthly debts, credit ratings, the amount saved for a down payment, and how much debt they are willing to take on, among other factors.

Still, Tamboer agreed to help calculate an affordable home based on median family income.

The National Association of Home Builders tracks median household income and median home prices in real estate markets around the country. 

The Greater Phoenix area is made up primarily of Maricopa County, and NAHB data for the second quarter of 2021 showed median household income is $79,000.

RELATED: Is the Phoenix housing market headed for a crash in 2021? Experts say no and here's why

It also calculated the median home price for the second quarter at $378,000, though that number increased to more than $400,000 for the latest month available.

Given that, 12 News asked: can the typical family in the Valley afford the typical home for sale?

According to Zitlow, Cornerstone uses a 45% debt-to-income ratio when taking a look at what loans to offer. That means all debts, including car payments, student loans, and any housing costs need to account for less than 45% of gross income every month.

Using that guideline, a family with $79,000 in annual income can pay up to $2,962.50 in debt. However, most families do carry some debt before housing costs.

According to Zitlow, the median monthly debt for an American household is about $1,000.

That leaves the median family making the median income with up to $1,900 for a house payment.

When that monthly payment is factored in with a 3.5% down payment and a credit score above 740 for the lowest loan rate, our mortgage calculator shows that, yes, a family with the median income could afford the median home for sale.

But how many homes at that price are actually for sale? That’s another issue prospective buyers face.

RELATED: Valley's hot housing market more prone to scams, Attorney General warns

Real estate agent Fitzgerald said a prospective buyer would be looking at Phoenix’s farther-flung suburbs for housing in that price range.

“Oh, gosh, there's not very many that are below 400,000,” Fitzgerald said. “You’re going to look anywhere from like Mesa, Apache Junction, Surprise, Glendale, possibly Gilbert, New River, Cave Creek.”

“If you really need a home and want to live here, you got to kind of take what is available,” Fitzgerald said.

Buyers make multiple offers, usually over list price

Both the realtor Fitzgerald and the lender Zitlow, who often work together with prospective buyers, try to mentally prepare their clients to write many offers and to expect rejection in this competitive market.

“You could go anywhere from $25,000 to $75,000 over the list price, believe it or not,” Fitzgerald said, adding that she regularly resorts to showing her clients homes via FaceTime, telling them they may need to write an offer without ever having seen the home in person. “I think it's the buyers that get really disappointed that don't know what they're up against. That's where they can get really discouraged, and sometimes they end up leaving and saying ‘I can't buy here, I'm going to go somewhere else.’”

There are success stories, however. Zitlow and Fitzgerald recently teamed up to help Taylor Richison and his girlfriend buy a home in Gilbert. They wrote offers on six houses and finally got one accepted.

“At first, we knew that we're going to have to put in a couple offers likely,” Richison said. “But still, when you put that first offer in on the house, you get real attached to it. You get really excited thinking you're going to get it; definitely wasn't the case.”

Richison said the low point of his home buying experience was offering $60,000 over the list price and coming away empty-handed.

“The owner came back and said that that wasn't even a high enough offer to counter. That’s when it started getting a little stressful thinking that we weren't going to be able to find [a house],” Richison said.

Richison and his girlfriend have an income that is above the median household income, but Zitlow still wants prospective buyers to know that there is hope.

“I think people come to us and they’re, like, deflated before they ever even start, because of what they read on the internet or who they talk to,” Zitlow said. “We just need to make sure that we're educating people, pouring into people, if they decide now's not a great time to buy, then so be it, but I don't want them to make that decision based on wrong information.”

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