Arizona Housing Market Forecast & Trends
The Arizona housing market has been experiencing steady growth over the past few years, and 2023 looks to be no different. According to the recent report released by Zillow, the average Arizona home value is $409,196, which is up 4.3% over the past year. This growth trend is expected to continue throughout the year, making it a promising time for buyers and sellers alike. In this blog post, we will take a closer look at the Arizona housing market trends in 2023 and what they mean for buyers and sellers.
The typical home value in Arizona is $409,196, which is up 4.3% over the past year. This growth trend is expected to continue throughout the year, making it an excellent time to invest in Arizona real estate. Here are some additional key takeaways. Based on the data provided, the Arizona housing market is expected to remain competitive in 2023. The median sale-to-list ratio of 0.983% indicates that homes are selling close to their initial listing price.
The high demand for homes is reflected in the 13.8% of sales being over the initial list price. However, there are still opportunities for buyers to find deals on homes, as 64.5% of sales were under the initial list price. The median days to pending of 47 days suggests that homes are selling quickly in Arizona. The market is expected to remain stable in 2023, with most regions showing slight decreases or increases in value.
The latest ZHVF data released by Zillow shows the forecasted percentage change in home prices for various regions in Arizona over the next year, with three different timeframes listed: February 28, 2023; April 30, 2023; and January 31, 2024. It appears that housing prices in most regions of Arizona are expected to decline slightly or remain relatively stable in the short term.
For example, the Phoenix metro area is projected to experience a 0.9% decline in housing prices by the end of February 2023, followed by a further 1.6% decline by the end of April 2023. However, the market is expected to rebound slightly by the end of January 2024 with a 0.2% increase in prices.
On the other hand, some areas are projected to see modest price increases over the same time period. For instance, Sierra Vista is expected to experience a 0.4% increase in housing prices by the end of February 2023, followed by a more significant 1.1% increase by the end of April 2023, and a further 2.6% increase by the end of January 2024.
It's worth noting that these projections are subject to a degree of uncertainty and can change based on various factors such as economic conditions, changes in demand, and other market fluctuations.
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The graph below depicts the median or average house value in the region over a number of years. Migration patterns, according to some analysts, are the fundamental reason for this hot housing market. Arizona continues to get a significant number of residents from California, Texas, Illinois, and Washington. There is a limited available supply of homes. Because of the high demand, homebuilders are unable to keep up with supply, and a housing bubble can't burst if there aren't enough homes for sale.
Here's Zillow's forecast for the metro areas in Arizona. Rising home values and listing prices, combined with limited inventory, indicate that Arizona's housing market is tilted toward sellers. This trend is likely to continue for the foreseeable future unless inventory grows faster than demand or rising interest rates ultimately dampens the demand to that extent.
| Region Name | Forecast for January 2024 |
|---|---|
| Phoenix, AZ | -0.2% |
| Tucson, AZ | 1.1% |
| Yuma, AZ | 1.9% |
| Lake Havasu City, AZ | 1.5% |
| Flagstaff, AZ | 0.9% |
| Sierra Vista, AZ | 2.6% |
| Show Low, AZ | 3.1% |
| Payson, AZ | 3.1% |
| Nogales, AZ | 2.1% |
| Safford, AZ | 1.6% |
If mortgage rates go on a decreasing trajectory in 2023, prospective buyers may return to the market to increase the demand. The important thing to take away from the shortage of housing units is that economists anticipate that the price of homes may continue to rise slowly in the AZ housing market in 2023.
On the supply side, it favors the property sellers. The bottom line here is that a stark imbalance between supply and demand continues to put upward pressure on AZ home prices. This partly accounts for the somewhat bold Arizona real estate market forecast for coming years. The other factors are that the economy of Arizona is robust, but the state is struggling with elevated levels of inflation and housing price growth. In 17 different states, the unemployment rate is at an all-time low.
Arizona has 3.3 percent unemployment. The pace of population increase in Arizona is the fourth fastest in the country. A significant number of states saw a loss in population as a consequence of COVID-19, low birth rates, and migration to neighboring states. Florida, Texas, and Arizona are the three states with the most rapid population increases. Years of underbuilding are a key contributor to the low inventory.
According to a study conducted by the Weldon Cooper Center for Public Service at the University of Virginia, Arizona's population is projected to expand by 26.1% between 2020 and 2040 – an increase of 1,897,585 people. As the population is expected to rise yet there are only a few available homes on the market.
This also raises a bit of a concern that in Arizona wages are not keeping up with the rising costs of housing. When prices go up, some buyers can no longer afford to buy and drop out. The faster that pricing goes up, the more buyers tend to drop out, at least in a healthy market. Mortgage rates also play an impact here. In the past few years, interest rates have remained at historically low levels.
This is one of the causes that contributed to a countrywide increase in home-buying activity. However, rates have increased somewhat during the previous several months in 2022. If rates continue to rise, the Arizona real estate market might experience a general cooling trend. However, the persistent supply deficit is projected to “outweigh” this effect, guaranteeing that the AZ housing market will stay competitive long into 2023.
Of course, there is also a great deal of uncertainty in the air. From escalating inflation to the conflict in Ukraine, several elements might affect the economy in the future. Consequently, it is difficult to make reliable projections for the Arizona real estate market or any other market in the United States.
Here's the median price of a home in some of the counties of Arizona (source: Realtor.com)
The data from Realtor.com shows the median listing home price and listing price per square foot for various counties in Arizona. Maricopa County has the highest number of homes for sale and rent, with a median listing home price of $485.3K and a listing price per square foot of $270. Coconino County has the highest median listing home price of $650K, while Cochise County has the lowest median listing home price of $279.9K. The data indicate that the housing market in Arizona is diverse and offers options for buyers with different budgets.
|
Counties
|
Median Listing
Home Price |
Listing
$/SqFt |
For Sale
|
For Rent
|
|---|---|---|---|---|
|
Maricopa County
|
$485.3K
|
$270
|
24,340
|
9,550
|
|
Pima County
|
$369K
|
$216
|
5,994
|
1,545
|
|
Yavapai County
|
$575K
|
$301
|
4,118
|
250
|
|
Pinal County
|
$389K
|
$210
|
6,540
|
856
|
|
Mohave County
|
$385K
|
$238
|
5,020
|
305
|
|
Coconino County
|
$650K
|
$373
|
1,035
|
227
|
|
Navajo County
|
$463.5K
|
$268
|
1,204
|
41
|
|
Gila County
|
$425K
|
$287
|
615
|
27
|
|
Yuma County
|
$299K
|
$196
|
898
|
100
|
|
Cochise County
|
$279.9K
|
$166
|
1,565
|
130
|
Arizona's housing market has over 900,000 renter households, accounting for 36% of the total number of households. According to a report from the National Low Income Housing Coalition (NLIHC), rental prices in Arizona have become out of reach for many residents. For too many low-income workers, wages have not kept pace with rising rents and home prices. Workers need to make $21.10 an hour to afford a 2-bedroom rental at a fair-market rate.
In Arizona, the Fair Market Rent (FMR) for a two-bedroom apartment is $1,097. To afford this level of rent and utilities — without paying more than 30% of income on housing — a household must earn $3,658 monthly or $43,892 annually. Assuming a 40-hour workweek, 52 weeks per year, this level of income translates into an hourly Housing Wage of $21.10.
The minimum wage in Arizona is $12.00/hr and the Average Renter Wage is $17.46. Cost-burdened is defined as spending more than 30% of one’s monthly income on housing and utilities. Neighborhoods in west and South Phoenix are the most cost-burdened. In some cases, more than 50% of households are paying 30% or more of their income on housing costs, while less than 29% of renting households are housing cost-burdened in the north.
Flagstaff MSA is the most expensive MSA where you need an hourly wage of $24.35 to afford a 2-bedroom rental. The second most expensive MSA is Phoenix-Mesa-Scottsdale, where you need an hourly wage of $22.56 to afford a 2-bedroom rental.
Between 2010 and 2018, the City of Phoenix’s median income increased by only 10%, median rent increased by over 28%, and the median home price increased by over 57% during this time. In 2018, half of Phoenix renters were considered housing-cost burdened, 25% of homeowners were housing-cost burdened and altogether 36% of the entire population is housing-cost burdened. According to a report by Phoenix.gov, 65 % of households that fall within or below the moderate-income range would require some amount of subsidy to achieve housing that is considered affordable at their income level.
Sources:
- https://www.zillow.com/az/home-values/
- https://www.realtor.com/realestateandhomes-search/Arizona/overview
- https://www.thecentersquare.com/arizona/how-arizona-s-population-will-change-in-the-next-20-years/article_86c80054-4e38-5825-b0d1-ede98be1c649.html
