The Arizona housing market has experienced fluctuations in 2023, and many are eager to know what the future holds for this dynamic real estate landscape. Various data sources, such as Zillow and housing market forecasts, provide insights into the current state and potential developments. Let's explore the forecast for the Arizona housing market in the coming months.
Current Arizona Housing Market Snapshot
According to Zillow, the average home value in Arizona is $420,310. This figure reflects a 6.8% decrease over the past year. Additionally, properties are typically going pending in around 19 days, indicating a swift pace of sales and a competitive market environment.
Arizona Housing Sales Metrics
Examining sales metrics provides insights into market dynamics and buyer behavior. The median sale to list ratio for June 30, 2023, is 0.993, suggesting that homes are being sold at a price very close to their listing prices.
Of the sales recorded on June 30, 2023, 20.9% were over the list price, showcasing the competitive bidding environment. On the other hand, 53.4% of sales were under the list price, showcasing the flexibility in pricing strategies employed by sellers.
Regional Trends and Forecast
Let's take a closer look at the Metropolitan Statistical Areas (MSAs) within Arizona and their projected trends:
- Phoenix, AZ: A projected growth of 0.6% by August 31, 2023, 1.4% by October 31, 2023, and 6.9% by July 31, 2024.
- Tucson, AZ: Expected to experience growth of 0.5% by August 31, 2023, 1.6% by October 31, 2023, and 7.6% by July 31, 2024.
- Lake Havasu City, AZ: Foreseen growth of 0.3% by August 31, 2023, 1.2% by October 31, 2023, and 7.6% by July 31, 2024.
- Yuma, AZ: Expected to grow by 0.8% by August 31, 2023, 1.7% by October 31, 2023, and 8.3% by July 31, 2024.
- Flagstaff, AZ: Projected to grow by 0.7% by August 31, 2023, 0.9% by October 31, 2023, and 7.2% by July 31, 2024.
- Sierra Vista, AZ: Anticipated to grow by 0% by August 31, 2023, 0.5% by October 31, 2023, and 6.2% by July 31, 2024.
- Show Low, AZ: Expected to grow by 0.5% by August 31, 2023, 1.4% by October 31, 2023, and 9.3% by July 31, 2024.
- Payson, AZ: Foreseen growth of 0.7% by August 31, 2023, 1.8% by October 31, 2023, and 8.6% by July 31, 2024.
- Nogales, AZ: Expected to grow by 0.7% by August 31, 2023, 2% by October 31, 2023, and 8.5% by July 31, 2024.
- Safford, AZ: Anticipated to grow by 0.3% by August 31, 2023, 0.9% by October 31, 2023, and 6.1% by July 31, 2024.
The Arizona housing market's forecast is a mix of nuanced trends and opportunities. Despite recent price adjustments, the projected growth across various MSAs indicates a positive outlook for the market. Buyers and sellers alike will find it valuable to stay informed about these trends as they navigate the diverse landscape of Arizona's housing market.
ALSO READ: Will the US Housing Market Crash?
Are Arizona Housing Prices Dropping?
The recent data provided by Zillow suggests that housing prices in Arizona have experienced a 6.8% decrease over the past year, as of July 31, 2023. This decrease indicates a market correction following a period of growth. However, it's important to note that fluctuations in housing prices are not uncommon and can be influenced by a variety of factors, including economic conditions, inventory levels, and buyer demand. The decrease in prices may present opportunities for potential buyers looking to enter the market at a more affordable range.
What Will Happen to the Arizona Housing Market?
Forecasting the future of any housing market involves considering a multitude of factors. As of July 31, 2023, Zillow's data predicts a 3.6% increase in the Arizona housing market over the next year. This projected growth indicates a potential rebound in housing prices and a positive trajectory for the market.
Additionally, the forecast provides insights into various Metropolitan Statistical Areas (MSAs) within Arizona, indicating growth across different regions. Buyers, sellers, and investors should closely monitor economic indicators, supply and demand dynamics, and overall market trends to make informed decisions as the Arizona housing market evolves in the coming months.
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.
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 a 3.5 percent unemployment rate, a 7.9 % Chg from a year ago. 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 $549.5K and a listing price per square foot of $284. Coconino County has the highest median listing home price of $720K, while Cochise County has the lowest median listing home price of $299.9K. 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
|
$549.5K
|
$284
|
19,250
|
11,158
|
|
Pima County
|
$397.9K
|
$222
|
5,135
|
1,498
|
|
Yavapai County
|
$628K
|
$323
|
4,451
|
289
|
|
Pinal County
|
$399K
|
$211
|
5,431
|
854
|
|
Mohave County
|
$412.9K
|
$246
|
4,676
|
328
|
|
Coconino County
|
$720K
|
$375
|
1,447
|
234
|
|
Navajo County
|
$480K
|
$286
|
1,579
|
31
|
|
Gila County
|
$499K
|
$295
|
755
|
24
|
|
Yuma County
|
$335K
|
$206
|
813
|
194
|
|
Cochise County
|
$299.9K
|
$174
|
1,603
|
125
|
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
