PHOENIX (By Catherine Reagor
Burrough, Arizona Republic) March 13, 2004
- Rising home prices are shutting the door on teachers, firefighters, police
officers, government employees and retail and service workers who want to
live near their jobs.
As prices rise in Phoenix and its closer suburbs, frustration is increasing
for those who work there. Often outbid and overlooked in metro Phoenix's hot
housing market, they either have to continue renting or count on a long
commute from the Valley's fringes.
The cost of a home in the Phoenix area jumped almost 25 percent in the past
year. The typical household income for the area inched up only 2 percent to
reach $49,500, and that figure often includes two incomes.
It had not been this hard for a Valley resident to afford a home since 1989.
The phenomenon is typical of many major cities on the East and West coasts,
and in Phoenix the affordability crunch is expected to get worse this year
as home prices continue to climb above $200,000 and mortgage rates inch up.
Crisis may be on way
"Phoenix is heading for a real crisis," said residential real estate developer Gregg Holmes, president of Scottsdale-based Stardust Cos."If our workforce can't afford to live here, the economy will suffer and growth will slow."
He is leading a group of business, civic and government leaders looking for solutions so Phoenix doesn't turn into another Los Angeles, where many people commute at least two hours a day to get to work. Other non-profit and government housing groups are trying to help Phoenix workers find housing they can afford. But the need is growing faster than the resources available.
Phoenix is in better shape than California. Median home prices in Los Angeles, San Francisco and San Diego are at least triple the $200,000 that an existing house costs in metro Phoenix. Household incomes in those California cities are only $10,000 higher.
But people in metro Phoenix are feeling the pinch between their incomes and higher home prices.
Just ask Rebecca Mahlerwein. She teaches in Tempe but can't afford a house in the same city as her kindergarten pupils. The starting salary for the typical elementary school teacher in the Valley is about $30,000. Mahlerwein's husband is also a teacher.
The couple found a house they could afford in the southwest Valley suburb of Laveen, but now Rebecca has a 40-minute drive to her classroom every day.
"I carpool with another teacher so that helps, but it would be so nice to live in Tempe," she said.
Many people with jobs important to the Valley communities where they work are forced to move farther and farther out to find homes they can afford. Much of metro Phoenix's most affordable housing is on its fringes, but most of the area's jobs are closer in.
Longer commutes
"There's a disconnect if people support a community but can't afford to live in it," said Jay Butler, director of the Arizona Real Estate Center at Arizona State University.Phoenix firefighter Gabriel Saenz has been looking for a house in the city where he works but can't find anything with enough space in a nice neighborhood for less than $200,000.
Starting firefighters make about $36,000 in the Valley. To afford a $200,000 house, a borrower needs to make about $50,000.
Out-of-state buyers helped push metro Phoenix homes sales and prices to records last year. Most are from pricier home and higher income areas such as California, the East Coast and Chicago.
Rising values are good news for sellers but not for buyers, especially first-timers who can't afford the $50 to $100 more a month that higher prices can tack onto a mortgage payment.
Higher mortgage interest rates will push monthly payments up more.
Saenz is looking in metro Phoenix's more affordable southwest suburbs of Tolleson and Avondale.
"It's not financial beneficially for me to rent. I would like to buy in Phoenix because then I am paying taxes to the city where I work," Saenz said.
If he buys in another Valley city, Phoenix could end up losing a firefighter as well as taxpayer because Saenz could get a job in Avondale or Tolleson.
Losing workers
If people can't find houses they can afford based on the money they can make in a city, they will move just as Saenz might.On a bigger scale, low housing costs have been one of the Valley's most attractive features for companies looking to relocate or expand.
If companies see their employees cannot buy a home in metro Phoenix, they might look elsewhere.
Business leaders see affordable housing as key to bringing in more jobs and keeping metro Phoenix's economy growing.
The goal of the Regional Workforce Housing Task Force led by Holmes is to help create more housing in all Valley communities for workers earning $20,000 to $42,000 a year. There are 500,000 people in Arizona whose salaries are $25,000 or less.
The task force wants to push for the development of more affordable housing by making it easier for builders to get through cities' zoning and design processes.
The group also plans to find ways to leverage funds set aside for affordable housing, such as the $20 million donation from Stardust founder Jerry Bisgrove, to provide more help to struggling home buyers.
The task force wants to ensure that in 15 years there's no shortage of affordable housing for the many workers making below the Valley's median income.
There have been some successful partnerships between Valley cities and developers to create affordable housing. A few years ago, Phoenix sold Artisan Homes a site in downtown Phoenix for half of its appraised price. As part of the deal, the houses sold for $135,000 and higher so families earning $40,000 to $80,000 a year could afford them. Several government workers with jobs in central Phoenix were able to buy in the new development and cut their commutes in half.
Until last year, metro Phoenix's housing prices were below the U.S. average. In 2004, the national median price for an existing house reached a record $189,000.
Major metro Phoenix employers like financial firm Wells Fargo, insurer USAA, electronic-component distributor Avnet and semiconductor firm Motorola all moved or expanded in the Valley partly because of the affordable housing available for their workers.
Chere Oliver is a paralegal for Wells Fargo. Her job was moved from the firm's downtown Phoenix office to a new facility in Chandler last year. She rents an apartment in north Phoenix and commutes almost an hour each way to work.
"I want to buy a townhome close to my new office, but I can't find anything," said Oliver, who has been approved for a $130,000 loan and been searching for a home she can afford in Chandler or Ahwatukee since September.
"I am 36. I want to get into the housing game while I can so I am not renting for the rest of my life."
Paying too much
Investors willing to pay more than a seller's asking price have beat her out on every house on which she has made an offer."There are a lot of sad people out there working full time who can't find houses they can afford near their jobs," said Tina Rose, Arizona manager of Allied Home Mortgage. "Prices keep going up, making it even worse for them."
Metro Phoenix's rising housing costs and relatively flat income gains have many home buyers and renters paying more than they can comfortably afford.
An estimated 27 percent of all Arizona homeowners and 47 percent of all renters spend more than 30 percent of their income on housing, according to the Workforce Housing Task Force.
Families that spend that much on housing could be forced to scrimp on essentials such as food, clothing, education, day care and health care.
Danielle Espinoza was paying $650 in rent, more than 30 percent of the pay she brings home as a receptionist for Allstate Insurance.
She grew up moving several times and remembered the instability of living that way.
"I didn't want that for my son," she said.
Help for buyers
With the help of a Valley affordable-housing group, Espinoza was able to buy a two-bedroom condominium in Glendale last year. Her mortgage payment is $450 a month.But it took Espinoza a while to find a home she could afford.
"The first houses I made offers on, investors bought away from me," said Espinoza, who took classes on buying a home and establishing credit at Neighborhood Housing Services of Phoenix.
Rita Carrillo, executive director of the non-profit Neighborhood Housing Services, said the housing affordability crisis will intensify as the Valley's grows.
"I can't imagine how my friends will ever be able to buy houses if prices keep climbing," Espinoza said.
During the past five years, home prices in Great Phoenix have increased more than 55 percent, but incomes are up less than 10 percent. There is no sign of housing prices stabilizing this year. Thirty-year mortgage rates are expected to climb to at least 6.5 percent adding $100 onto the monthly payment for a $200,000 house.
Butler said solving the affordable housing problem isn't only about providing less expensive homes or help with down payments.
"Incomes in Phoenix need to rise to keep pace with the area's higher cost of living," he said.
Reach the reporter at (602) 444-8040 or catherine.burrough@arizonarepublic.com.
