Catherine Reagor
The Arizona Republic

The housing market’s woes are generating opportunities for first-time home buyers.

Despite higher home prices and interest rates, fledgling buyers are finding more options and more time to look because of a record number of homes for sale.

More sellers are motivated to cut prices. Some real estate agents are willing to cut commissions to make a deal. There’s more financial aid than ever to help people get into homes of their own.

Some buyers, particularly first-timers, are now purchasing homes with little or no down payment, no mortgage insurance costs and still-reasonable mortgage rates.

For the first time in years, the housing industry isn’t racing ahead of those who yearn to buy their first home, but turning back and reaching out to those customers. The industry, cities and non-profits are trying to overcome the Valley’s 50 percent run-up in home prices last year.

That’s not to say the market isn’t a tougher buy.

Metropolitan Phoenix’s housing affordability rating has fallen to an all-time low, meaning it’s harder than ever for someone making the median income here to buy a home. For an existing home, the typical household makes only enough to comfortably afford 71 percent of the monthly payment. Three years ago, that household could afford 131 percent of the monthly payment for a home sold that year, according to the Arizona Real Estate Center at Arizona State University Polytechnic.

Incomes haven’t kept up with rising home prices, so the affordability crunch is affecting more people. Teachers, firefighters, police officers and government employees are all struggling.

Also, the pool of homes priced below $200,000, what the typical Valley household can afford, is shrinking fast. In July, only 14 percent of all existing homes that sold cost less than $200,000. A few years ago, the percentage was almost twice as high.

Prices may be reaching a plateau. The Valley’s median used-home price dipped slightly in July to about $265,000.

In the meantime, new assistance programs are benefiting first-time buyers.

“Home buyers who do their homework can get a lot of help right now,” said Bettina Franco, an agent with Phoenix-based Home Smart Real Estate.

It’s a complete turnaround from last year, when newbie buyers couldn’t compete against investors who sparked bidding wars for homes and paid cash.

Getting help

Melissa Herrington is an engineer with Honeywell and wanted to buy a home near her Tempe office. It took her six months, down-payment help and her real estate agent kicking in some of his commission to close on a Mesa condominium in June.

“Originally the lender told me I qualified for $190,000, and I couldn’t even find a decent home in that price range,” said Herrington, who is 28. “Then I realized my payments were going to be much higher than I could comfortably afford.”

Financial experts advise people against spending more than 30 percent of their incomes on housing. Based on the Valley’s current home prices and incomes, someone making the median income of $50,000 would have to spend almost half of their net monthly income to buy a home for $265,000, the median price.

Higher interest rates also are making it tougher on buyers. The average 30-year fixed mortgage was 6.4 percent last month, compared with 5.4 percent a year earlier. That adds $200 to a monthly mortgage payment.

“We are getting a lot of requests for help,” said Joann Hauger, chief executive of the non-profit Community Housing Resources. “The higher home prices are making it almost impossible for many people working in the Valley to qualify for their first house on their own.”

Herrington got help and lowered her expectations. She worked with Community Housing to get $2,500 for her down payment. She ended up paying $148,500 for a two-bedroom condo to keep her payment more manageable at $1,100.

“There are some really good, aggressive programs to help home buyers now, and some home prices have started to come down.” said Tina Rose, Arizona manager of Allied Home Mortgage. “Many first-time buyers have a better chance now than they did a year ago.”

Relatively affordable

For decades, metro Phoenix’s housing market has been one of the most affordable in the West because of its abundance of developable land. People are able to drive farther out to find housing they can afford. Home builders call it “driving until you qualify.”

But last year, the Valley’s median home price topped the national median for the first time.

“We have taken our affordable housing market for granted,” said Shelia Harris, director of the Arizona Housing Department. “We have lost sight of how critical it is for people working here to be able to buy homes.”

Some experts worry that we could be headed for an affordability crisis like California’s.

In most big California cities, it’s tough to buy a home. Los Angeles residents who make the area’s typical household income could afford only 2 percent of the homes that sold in the first half of this year. It’s the least affordable housing market in the country.

The situation is only slightly better for home buyers in San Diego, where 5 percent of the houses are affordable for the typical worker. In San Francisco, only 8 percent are.

In metro Phoenix, 33 percent of all homes sold were affordable to people making the median wage. Nationally, the figure is 41 percent.

Jay Butler, director of ASU’s Real Estate Center, said the Valley’s reasonable housing prices have helped drive much of its growth in recent decades.

“If people are moving here for jobs but can’t afford homes, they aren’t as likely to move here,” he said.