Buying Your First Home in Phoenix, AZ? Here’s How Much Money You Need to Make

You now need a six-figure salary to afford a starter home in Phoenix.

Phoenix, AZ, is a sunny, outdoorsy city home to renowned sports franchises, spectacular vistas, and plenty of golf courses. However, Phoenix isn’t just the heart of The Valley of the Sun; it’s also home to a booming real estate market that’s seen significant growth in recent years. 

For many, buying a home in Phoenix is a dream come true, but it’s also important to know how it will impact your finances. From down payments to monthly mortgage payments, there’s a lot to understand before buying your first home 

So whether you already live in The Valley of the Sun or are looking to relocate to the area, here’s a breakdown of the income you’ll need to purchase your first home in Phoenix.

Check out our original report for a detailed nationwide analysis.

How much income do you need to buy a starter home in Phoenix?

The median sale price of a starter home in Phoenix is $330,000. In order to afford this, first-time homebuyers in Phoenix should make $101,321 per year, up 6.6% from 2023. However, the median income in Phoenix is $89,521, meaning the typical resident often can’t afford a starter home.

As expected, starter homes in Phoenix are much more affordable than the average home (all price brackets combined). In order to afford any median-priced home in the area, you’ll need to make $121,368 (as of October 2023). 

Nationwide, you need an income of $75,849 to afford a typical starter home, which costs an average of $240,000. The average U.S. household earns an estimated $84,072.

First-time homebuyers’ guide to the Phoenix housing market

Phoenix has been a popular migration destination for years among homebuyers looking for sunshine and affordability. But during the pandemic, the region saw an explosion of growth and popularity, which has hardly slowed down. In fact, the city has consistently been the top destination for relocating home buyers. This influx has boosted house prices by 29% since January 2021, from $325,000 to $459,000 in April 2024. House prices have nearly tripled in the past decade.

Climate risks are a major concern for residents in Phoenix, though. The city is in the midst of a decades-long megadrought plaguing the Southwestern U.S., and recently hit 110° F for 31 days in a row. 2023 was also the city’s hottest and driest on record.These trends are expected to continue as climate change worsens.

The desert city is home to many world-class amenities located throughout its spread-out neighborhoods. Some popular neighborhoods in Phoenix include Central City, Maryvale, and Ahwatukee Foothills. From the Phoenix Zoo and Heard Museum to South Mountain and Camelback Mountain, there are plenty of reasons to call Phoenix home.

What does a typical down payment look like for a starter home in Phoenix?

Here are some common down payment amounts for a typical $330,000 starter home in Phoenix:

Down payments can range from 0% to 100% of the total house price, depending on your budget, loan type, and long-term priorities. While experts have historically recommended budgeting for a 20% down payment, the increasing cost of homes and continued sluggish wage increases has led to a 15% down payment becoming more common. 

Some loan types allow for lower down payment amounts. For example, a Federal Housing Administration (FHA) loan requires just 3.5% down, while the lowest possible down payment for a conventional loan is 3%. These amounts typically depend on your credit scores, so buyers with higher credit scores may qualify for lower down payments.

What is the typical mortgage payment for a starter home in Phoenix?

The typical monthly mortgage payment for a starter home in Phoenix is $2,533. This assumes you put 3.5% down and have around a 7% interest rate.

If this payment sounds too high, you could consider renting an apartment in Phoenix. The average rent price is $1,962, possibly making it a better option while you save for a down payment on a house. You can also use an affordability calculator to see what you can afford based on your income and down payment.

What should you do next?

If you’re in the market for your first home in Phoenix, it’s important to understand how much house you can afford. Take your annual income, credit score, the current mortgage rates, and local market trends to make a decision that works best for you.

From there, a Phoenix agent can help you navigate the entire home buying process and provide valuable local expertise. To learn more about how to buy a home, check out Redfin’s First-Time Homebuyer’s Guide.

Methodology

Redfin divides all U.S. properties into five buckets based on Redfin Estimates of homes’ market values. There are three equal-sized tiers, as well as tiers for the bottom 5% and top 5% of the market. Redfin defines “starter homes” as homes whose sale price fell into the 5th-35th percentile of the Redfin Estimate tier. 

We calculated the annual income needed to afford a starter home by assuming a buyer spends no more than 30% of their income on housing payments. Housing payments are calculated assuming the buyer made a 3.5% down payment and also take a month’s median sale price and average mortgage-interest rate into account. 

The national income data is adjusted for inflation using the Consumer Price Index. 2024 income is estimated based on projections from the U.S. Census Bureau’s (ACS) 2022 median household income using the 12-month moving average nominal wage growth rate. The rate was compiled from the Current Population Survey and reported by the Federal Reserve Bank of Atlanta.

We assume housing payments include the mortgage principal, interest, property taxes, homeowners insurance, and mortgage insurance (when applicable).

All data sourced February 2024 unless otherwise stated.

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