Is it the right time for you to buy a home in Arizona and are you ready?
Is It a Good Time to Buy a Home in Arizona?
In general, YES!
Because there are still a lot of affordable places to live in Arizona.
Although Arizona home prices have increased, there are still many affordable urban and rural Arizona communities that have a reasonable cost of living, lower median home value and good affordability ratio.
Because interest rates are still incredibly low on a 30-year fixed mortgage.
In fact, rates are at or near an all-time low. Therefore, you can lock in a low payment for the life of the loan. This means that right now, owning a home is very affordable and it is easier to qualify for a mortgage.
Consider this: For a loan amount of $150,000 your payment goes up about $90 a month for every 1% increase in rate. That difference is the equivalent of about 2% of the median income in Arizona. Think of it this way, that’s just under the amount of the average annual employee raise.
Chart created with data from: http://www.freddiemac.com/pmms/pmms30.htm
Because homes in Arizona are going up in value. This will help you build wealth.
According to Zillow, the average house is expected to increase in value by just over 4% in the next year. So, for example, if you buy a home for $150,000 you should gain a little over $6000 in equity just in the next year. And it could be more.
“Homeownership plays a pivotal role in the U.S. economy and has historically been one of the primary sources of wealth accumulation for middle class families,” – Lawrence Yun, NAR Chief Economist
With that said, it is likely that either you or someone you know lost their home – or their equity – in the past decade’s financial crisis. Many people learned that home values don’t always go up. Home values fluctuate; they go up, down and stay flat. Nevertheless, most people agree that, even when adjusting for inflation, home values increase to over time.
Bottom Line: If you are currently renting and you really want to own a home in Arizona, this is an incredible time to buy.
Why Buy a Home Instead of Renting?
When you’re renting, you’re paying someone else’s mortgage. Owning a home has many benefits.
If you rent, you are helping someone else obtain the benefits of home ownership.
Consider this example:
1300 square foot home with 3 bedrooms and 2 bathrooms in Avondale, AZ.
Rent This Home:
Monthly Payment: $1050
Rent paid after 1 year: $12,600
Rent paid after 3 years: $39,722 (1)
Rent paid after 5 years: $69,623 (1)
Total Tax Savings: $0.00
Total Equity Gained: $0.00
Buy This Home:
Purchase Price: $154,600
Monthly Payment: $1,110 (2)
Total Payments after 1 year: $13,320
Total Payments after 3 years: $40,204 (3)
Total Payments after 5 years: $67,441 (3)
Tax Deductions after 1 year: $1,675 (4)
Tax Deductions after 3 years: $4,941 (4)
Tax Deductions after 5 years: $11,095 (4)
Equity Gained after 1 year: $13,242 (5)
Equity Gained after 3 years: $31,540 (6)
Equity Gained after 5 years: $51,396 (6)
(1) assuming rental increase of 5% per year
(2) Principal, Interest, Tax, Insurance and HOA
(3) assuming property tax increase of 5% per year
(4) assuming 25% tax bracket.
(5) assuming 3% down payment* + 4% appreciation + principal paid)
* find out how to buy your home with no money out of pocket
(6) assuming 4% appreciation + principal paid
As demonstrated, buying a home in Arizona builds wealth more times than not.
Finally, with all things considered, it just feels good to own your own home.
Why Should You Not Buy?
Before you begin the home buying process, you should determine if owning a home in Arizona is right for you.
We’ve discussed that, generally speaking, it is a great time to buy a home in Arizona. But why should you not buy? To answer this, you need to review your personal situation, your goals and your lifestyle. A realistic personal assessment may reveal that home ownership is not right for you or you might want to delay the process. Your personal and financial priorities will determine what’s best for you.
Don’t Buy Before You’re Ready
Ask Yourself the Following:
“Is it a good time for me to buy a home in Arizona?”
“Am I better off buying than renting?”
“Do I know the pros and cons to buying a home?”
“Do I understand all of the costs to buy and own a home?”
“Is my employment stable and is my income steady?”
“Do I have a budget? Can I afford the house I want?”
Don’t Buy if You Don’t Want the Responsibility of Owning a Home
Be aware that buying a home may bring unwanted responsibilities such as maintenance and repairs.
Ask Yourself the Following:
“Do I want to maintain my yard and pool?”
“Do I want to have to make repairs for common household problems such as holes in the drywall, broken door locks, clogged drains and leaky faucets?
“Can I afford larger household expenses such as replacing the carpet, repairing the roof, replacing the AC unit?”
Don’t Buy if You Move A Lot
Owning a home can tie you down. Don’t buy if you don’t want that.
Free Advice from Professionals is Available … Ask A Lot of Questions
Buying a home is the single largest purchase that you are likely to make, and if you’ve never bought a home before, you probably have more questions than answers.
“Smart people ask questions about buying a home in Arizona because it saves them money.”
Don’t be afraid to ask a lot of questions, even if you think it should be something you know. The home buying process can have a lot of pitfalls. It’s possible that you already know a lot about what it takes to buy a home; that’s great. But ask questions because you may not know what you don’t know.
This home buyer series is intended to provide general information regarding the process of how to buy a house in Arizona. It is not intended to provide buyers with legal, accounting or financial advice. You are advised to seek the services of a skilled professional this those fields.
Additionally, this home buyer series does not set forth all qualification criteria for any of the loans described herein; all interested persons must successfully meet qualification criteria and complete the application process to obtain such loans.