The latest data show that the Phoenix housing market has seen a decline in sales volume but an increase in prices, which suggests that demand for homes is still strong. The decline in new inventory can be attributed to the increase in mortgage rates, making it difficult for would-be sellers to find the right home. However, boomers may provide some relief to the current shortage of inventory if they decide to sell and downsize.
Projections for the Phoenix housing market suggest that while the median sales price may rise slightly in the coming months, sales volume may continue to decrease. Buyers should expect increasing competition from each other as they chase a dwindling number of homes for sale, while sellers will have the upper hand in negotiations.
ALSO READ: Arizona housing market forecast 2023
According to Zillow's home value index, typical property values in Phoenix-Mesa-Scottsdale Metro declined by 1.3% over the last twelve months. The latest forecast is that Phoenix-Area home prices are projected to grow by 1.0% between March 2023 to March 2024. According to CoreLogic HPI, Phoenix Metro continued to experience price increases in February with a growth of 0.1% year over year.
To uncover where housing markets are cooling off most, SmartAsset analyzed the 100 largest metro areas, 92 of which had complete data. Phoenix-Mesa-Chandler, Arizona ranks No. 3 overall. The metro area has the fifth-highest percentage of house listings with a price cut (39.61%), which is 25% points higher than a year ago.
Another report obtained by Arizona's Family predicts that the Phoenix housing market could see a price drop of up to 25% in 2023 and 2024, similar to the 2008 Great Recession. The same report suggests that Arizona could be one of the states to experience the most significant drop in housing prices in the West.
Phoenix Housing Market Report For March 2023
Phoenix Metro Area: According to the Arizona Regional Multiple Listing Service, there were 7,417 home sales reported by ARMLS, which is a decline of 22.1% year over year. The median sales price also decreased by 8.7% year over year to $419,900.
Sales Volume and Prices
Sales volume in the first quarter of 2023 was down 22.1% year over year. However, the average sales price of a home increased for the second consecutive month, rising 3.4% month over month, an increase of $17,600. The median sales price of a home also increased for the second consecutive month, rising 1.9% month over month, an increase of $7,900. This suggests that despite a decline in sales volume, the demand for homes in the Phoenix market is still strong.
New inventory was down 19.1% year over year, which is consistent with the decline in sales volume. The increase in mortgage rates is the key reason new listings have declined sharply year over year. Not only were homes purchased in 2020, 2021, and early 2022 at great rates, but a large number of refinances also took place. Elevated mortgage rates are perhaps a bigger deterrent for would-be sellers than for would-be buyers. Supply registers just below 60% of what would be considered typical or average, making it tough for buyers to find the right home.
Boomers' Impact on the Housing Market
While supply is dwindling, baby boomers, defined as Americans between the ages of 55 and 74, account for nearly 42% of homeowners nationwide. For homeowners with low mortgage rates, it makes perfect sense to stay put. However, boomers with either low or no mortgages are in a position to sell their homes and downsize. This could provide some relief to the current shortage of inventory.
Forecast for the Phoenix Housing Market
The ARMLS Pending Price Index is projecting the median sales price will rise ever so slightly to $420,000 in April 2023. If projections are correct, the median sales price will be 11.58% lower than May 2022’s record high of $475,000. The year-over-year median sales price is expected to be 10.64% lower. Our models predict that year-over-year sales volume will be about 20% lower, indicating that the demand for homes may continue to decrease in the coming months.
Is Phoenix a Seller's Real Estate Market?
The following housing market median prices are based on all properties listed for sale on Realtor.com. Land and multi-unit residences included. This data is provided as an informational resource only. Phoenix, Arizona is experiencing a seller's real estate market in March 2023. This is due to a high demand for homes and a limited supply of available properties, which creates competition among buyers and drives up prices.
The sale-to-list price ratio of 98.79% in Phoenix indicates that homes are selling for almost the asking price on average, and the fact that homes are selling 1.21% below the asking price is further evidence of a seller's market. Additionally, the average time it takes for a home to sell in Phoenix is 59 days, which is relatively short and indicates that properties are not staying on the market for very long.
The median listing home price in Phoenix is $464.9K, with a median listing home price per square foot of $284. This shows that homes in Phoenix are more expensive compared to other areas in Maricopa County. Furthermore, there are 37 neighborhoods in Phoenix, with Arcadia being the most expensive neighborhood, with a median listing home price of $1.6M, and Central City South being the most affordable, with a median listing home price of $305.5K.
Phoenix is the seat of Maricopa County and the largest city in the state. Maricopa County is located in the central part of the state of Arizona and is the most populous county in the state. The county covers a total area of 9,224 square miles and has a population of over 4.6 million people as of the latest estimates. It is home to the state capital, Phoenix, as well as many other cities and communities.
In March 2023, the median listing home price in Maricopa County, AZ was $494K, which was a decrease of -1.2% compared to the previous year. The median listing home price per square foot was $269, which is slightly higher than the national average. The median home sold price was $445K.
Maricopa County is also currently experiencing a seller's market, with more people looking to buy homes than there are homes available. The sale-to-list price ratio for Maricopa County was 98.55%, meaning that homes sold for an average of 1.45% below their asking price in March 2023. A balanced market typically has a total sales-to-total listings ratio between 0.12 and 0.2.
Markets with a ratio above 0.2 tend to favor sellers, while markets with a ratio below 0.12 tend to favor buyers. Homes in Maricopa County, AZ typically sell after 62 days on the market, which is slightly longer than the national average. However, the trend for median days on the market in Maricopa County, AZ has gone down since last month, and slightly up since last year.
Phoenix Housing Market Forecast 2023-2024
What could be the Phoenix real estate market predictions for 2023? Phoenix is the 5th largest city in the country and continues to grow. New residents are drawn to Phoenix by its strong economy, relatively low cost of living, high quality of life, economic opportunity, and cultural attractions. Since 2000, Phoenix’s population has grown by 20% to include approximately 555,013 households and 1.6 million people.
It is the biggest city in Arizona and the state’s capital. It is a minimally walkable city in Maricopa County with a population of approximately 1,442,530 people. However, Phoenix itself is massive. It is the only state capital with more than a million people. It is the fifth-largest city in the country. The Phoenix housing market is much larger than Phoenix itself – it encompasses the entire Valley of the Sun, Phoenix’s sprawling suburbs that are home to another five million people. That makes the Phoenix metro area the twelfth largest in the country.
The favorable living conditions have, furthermore, comforted real estate investors and buyers to invest in Arizona real estate market. The Phoenix housing market was a headline in the news a decade ago when the housing crisis of 2007 and 2008 caused home values here to fall by as much as half. The slow recovery of the national housing market has taken a decade.
Since 2006, the population has grown faster than housing. This growth fueled by job growth has finally consumed the glut of re-sale housing created during the bubble years. Now the market is facing a shortage of homes for sale. The current typical home value of homes in the Phoenix-Mesa-Scottsdale Metro is $434,289. Home values have gone down 1.3% over the past twelve months.
According to NeighborhoodScout.com, in the past ten years, Phoenix real estate appreciated by 261.05%. This amounts to an annual real estate appreciation of nearly 13.70%, which puts Phoenix in the top 10% nationally for real estate appreciation.
Here is the latest housing forecast for Phoenix Metro Area.
- Phoenix-Mesa-Scottsdale Metro home values have gone down 1.3% over the past year.
- The Phoenix metro housing market forecast ending March 2024 is positive.
- Zillow predicts that Phoenix metro home values may drop by 1.0% between March 2023 to March 2024.
Phoenix Real Estate Investment: Should You Invest in Phoenix?
Should you consider Phoenix real estate investment? Many real estate investors have asked themselves if buying a property in Phoenix is a good investment. You need to drill deeper into local trends if you want to know what the market holds for real estate investors and buyers in 2023. If you are looking to make a profit, you don’t want to buy the most expensive property on the Phoenix real estate market and expect to make a good profit on rents.
Perhaps you are looking for a slightly different hold-over, an investment property in Phoenix that you might move into or sell at retirement in the future. Either way, knowing your profit potential and purpose is the first thing to consider. Let’s take a look at the number of positive things going on in the Phoenix real estate market which can help investors who are keen to buy an investment property in this city. We’ll address the biggest factor pulling people to the Phoenix housing market next.
Relatively Affordable Real Estate Market
While California and Florida are seen as hot real estate markets, one of the major attractions of the Phoenix real estate market is affordable real estate. During 2018 and 2019, Arizona was one of the top three states in the nation for population growth. Only Texas and Florida outpaced it, in terms of year-over-year growth. Population growth is particularly high within the Phoenix metro area. Homes in the Phoenix housing market are approaching the 2006 record. Home-price appreciation appears to be slowing a bit in the Phoenix area and most experts agree that prices will continue to climb for the foreseeable future.
According to the U.S. Census Bureau data, the population of the city of Phoenix rose by nearly 15% from 2010 to 2019. That’s well above the nation’s growth rate for that same timeframe. Population growth increases the demand for housing on both the purchase and rental sides. With all other things being equal, steady population growth tends to put upward pressure on home prices. The median home’s value has crossed $300,000 but that’s still cheaper than a starter home in coastal California. Don’t forget that the large retiree market means there is strong demand for one and two-bedroom houses and condos here, and those units are a fraction of the cost of a three-bedroom home.
High Rate of Appreciation Due To Short Supply
Although Phoenix has experienced consistent population growth, the housing market has not grown at the same rate. An Up for Growth study found that between 2000 and 2015 Arizona underproduced 505,134 housing units. This underproduction has caused a housing shortage in Phoenix. For example, in the last 30 years Phoenix produced approximately 220,000 new housing units, however, the population has grown by 820,000 people. Phoenix’s housing production has not kept pace with population growth.
This underproduction was magnified when construction virtually shut down during the recession of 2008. Since that time, construction has slowly increased but has not reached the level of production achieved before the recession. The current shortages of housing supply, relative to demand, are a primary reason housing costs are increasing. A significant increase in housing supply is necessary to keep pace with current and projected housing demand.
Highest Appreciating Phoenix Neighborhoods Since 2000 (List by Neighborhoodscout)
- Central City North
- Kenwood / Whites
- Roadrunner Park / Sleepy Hollow Trailer Village
- W Fremont Rd / S 15th Ln
- Papago Peaks Village / Parkview Village Park
- Villa Verde / Encanto Estates
- Lafamilia East
- Green Acres Park
The Growing Phoenix Rental Market
There is always going to be high tenant turnover in student housing markets. The presence of universities also influences local home prices and rents. The capital of any state will be home to its flagship university, and Phoenix is no exception. Phoenix is so large that it doesn’t just host the flagship Arizona State University campus in Tempe.
There are secondary campuses in downtown Phoenix, northwest Phoenix, and neighboring Glendale. These schools alone have more than seventy thousand students. The Arizona Summit Law School, Grand Canyon University, and several others are located here. There are easily 100,000 college students renting in the Phoenix housing market. You could invest in large single-family homes or multi-unit buildings to rent to students at any of these campuses.
Phoenix Rental Trends: 36% of the households in Phoenix are renter-occupied while 64% are owner-occupied. The rents are rising and it makes sense to keep your home and rent it out. In some neighborhoods, the average rental home may rent well over $2,500 a month.
As of April 2023, the average rent for a 1-bedroom apartment in Phoenix, AZ is currently $1,400. This is a 6% increase compared to the previous year. Over the past month, the average rent for a studio apartment in Phoenix increased by 2% to $1,245. The average rent for a 1-bedroom apartment remained flat, and the average rent for a 2-bedroom apartment increased by 2% to $1,700.
- Two-bedroom apartment rents average $1,700 (a 6% increase from last year).
- Three-bedroom apartment rents average $2,240 (a 2% increase from last year).
- Four-bedroom apartment rents average $2,500 (a 4% increase from last year).
The “Zumper Phoenix Metro Area Report” analyzed active listings last month across the metro cities to show the most and least expensive cities and cities with the fastest growing rents. The Arizona one bedroom median rent was $1,365 last month. Scottsdale was the most expensive city with one bedrooms priced at $1,870 whereas Bullhead City ranked as the most affordable city with one bedrooms priced at $1,000.
The best place to buy rental property is about finding growing markets. Cities like Surprise and Glendale are good for investors looking to get started with rental property ownership at an affordable price. These trends provide a macro look at the growing rental demand. Each real estate market has its own unique supply-demand dynamics with unique neighborhoods that present their own opportunities for investors.
These cities look good for rental property investment this year as rents are growing over there.
The Fastest Growing Cities For Rents in Phoenix Metro Area (Y/Y%)
- Casa Grande had the fastest growing rent, up 10.9% since this time last year.
- Flagstaff saw rent climb 10.6%, making it second.
- Glendale was third with rent jumping 9.9%.
The Fastest Growing Cities For Rents in Phoenix Metro Area (M/M%)
- Lake Havasu City rent had the largest monthly growth rate, up 6.1%.
- Casa Grande rent increased 5.7% last month, making it second.
- Prescott was third with rent climbing 4.1%.
Phoenix's Growing Short-Term Rentals
There are more than 200 golf courses in Arizona, but most are located in and around the Valley of the Sun. There are several sports teams located in Phoenix and a wealth of tourist attractions. What makes Arizona unusual is the state’s open relationship with rental sites like Airbnb. A law that went into effect in 2016 made Arizona a leader in Airbnb rentals. The sites are required to collect taxes on the rentals, simplifying revenue collection for the state and the landlords. That probably explains why Airbnb guests grew by 150% in 2016 alone. The Airbnb market has exploded in Arizona during the past five years.
In late 2014, Phoenix only had 687 properties for rent listed on Airbnb. By March of 2019, that number had grown to 4,224 listed properties. This makes Phoenix a great place to buy a single-family home or condo to rent out to tourists (as a short-term rental). However, there are some restrictions on short-term rentals. In May 2019, the state government passed a bill allowing for more regulations of short-term rental operators in the state of Arizona.
In the bill, municipalities were allowed to restrict rentals to overnight stays and prohibit events that otherwise would require a permit, like weddings. Under the new law, owners of short-term rentals should have a sales tax license and they must list the sales tax license number on any advertisements (online/offline) for the property. Although, Phoenix’s short-term rental industry was hit hard by the COVID-19 pandemic the industry has shown resilience with relatively fair returns as owners implement safety measures to curb the spread of the virus and encourage guests to feel safe.
Phoenix is Landlord Friendly
If you want to invest in real estate, you typically want to do so in a market where you can quickly evict people who don’t pay their rent or damage property. You’ll be glad to know that the Phoenix real estate market is among these compared to surrounding states. Arizona, unlike California, allows landlords to serve an unconditional quit notice. If the tenant violates the rental agreement or doesn’t pay rent, they can be evicted quickly. Renter-friendly rules like requiring a landlord to return a rental deposit within two weeks are not a burden. Conversely, laws that say you can evict a tenant within ten days for lying on a rental application are a definite plus.
The Massive Snowbird Market
The snowbird movement is somewhat different than the conventional tourist market. Arizona has long attracted retirees who couldn’t afford Florida or wanted cleaner, allergy-free air that never included storm clouds. Quartzite, Arizona in particular draws two million snowbirds and tourists. The city stands out for its sixty-plus RV parks. An estimated 300,000 people stay all winter before returning home. Some own second homes in Arizona communities restricted to active adults, while others stay in trailer parks. This creates an unusually diverse opportunity for those considering investing in the Phoenix real estate market.
Growing Retiree Market
The same things attract many people to Phoenix as snowbirds cause many to retire here permanently. This means that many snowbirds end up staying permanently in the Phoenix housing market. Sun City stands out as a mecca for seasonal and year-round retirees, but it is far from the only retirement community in the Phoenix real estate market. The aging of the U.S. population makes investing in communities catering to older adults an excellent idea. Suppose you buy a house to renovate and rent out. Phoenix deals with a large retiree population, both permanent and seasonal.
To accommodate aging in place, they’ve loosened the rules on building “accessory dwelling units”, commonly known as mother-in-law suites. The city also recognizes the need for affordable housing, and they allow people to build and rent out ADUs as affordable housing, especially if the property is within walking distance of public transit. Buy a house, rehab it, and build a granny flat, and you have two rental properties for not much more than the price of one. And the city is almost certain to approve it because they want denser development.
Low Taxes in Arizona
Kiplinger listed Arizona as the 8th most tax-friendly state in the U.S. in 2018. The state income tax is 2.59% for low-income earners, 4.54% for wealthier families. The median home is worth around $177,000 and came with a property tax bill of around $1400, well below what you’d pay in Texas. Arizona has been lowering its capital gains tax rate, as well. The state has a relatively low transfer tax on deeds or land contracts, too.
The Major Wave of Renovation in Downtown Phoenix
The section of Phoenix wedged between Seventh Street and Seventh Avenue is undergoing a wave of commercial redevelopment, fueled by more than five billion dollars invested to date. High-rise developments and mixed-use projects have been built, and several more are underway. Public transit in this area is significantly improved. That is making this area and neighborhoods bordering it an excellent place to invest in the Phoenix housing market. Phoenix isn’t just redeveloping downtown to create a dense, walkable urban core. It is cultivating fifteen complete walkable communities across the metro area with strong public transit, denser housing, and locally provided services. This is a radical shift from the suburban sprawl the area has long been known for.
Phoenix, Arizona Real Estate Investment Markets
Investing in Phoenix's real estate can be a worthy investment due to a steady rate of appreciation. It’s only wise to think about how you can and should be investing your money. In any property investment, cash flow is gold. The Phoenix housing market is one of the hottest markets for 2020. Don’t let memories of the Great Recession bust that cut home values in the Phoenix housing market keep you away. There are plenty of reasons to invest in the Phoenix real estate market, only ten of which we’ve provided above. Have a look at the Phoenix real estate investment prospects we have provided from various real estate sources and make the best possible decision for yourself.
Good cash flow from Phoenix investment properties means the investment is, needless to say, profitable. The three most important factors when buying real estate anywhere are location, location, and location. The location creates desirability. Desirability brings demand. There should be a natural and upcoming high demand for rental properties. Demand would raise the price of your Phoenix investment property and you should be able to get a good return on your investment over the long term. The neighborhoods in Phoenix must be safe to live in and should have a low crime rate.
The neighborhoods should be close to basic amenities, public services, schools, and shopping malls. A cheaper neighborhood in Phoenix might not be the best place to live in. A cheaper neighborhood should be determined by these factors – Overall Cost Of Living, Rent To Income Ratio, and Median Home Value To Income Ratio. Some of the popular neighborhoods for buying a house or an investment property in Phoenix are Vistancia, Laveen, Deer Valley, South Mountain, Biltmore, DC Ranch, Arcadia, McDowell Mountain Ranch, Anthem, North Scottsdale, Cave Creek, Old Town, Litchfield Park, Trilogy at Vistancia and North Phoenix.
Phoenix real estate prices are well above average cost compared to national prices. It depends on how much you are looking to spend and if you are wanting smaller investment properties or larger deals such as duplex and triplex in Class A neighborhoods. The inventory is low, but opportunities are there.
Even as Phoenix home prices have reached new heights, the market remains attractive to residential real estate investors. As they continue to compete for potential investment properties at the lower end of the market, the challenges for first-time homebuyers will remain. The homebuyers won’t be able to outbid real estate investors and would end up renting. As with any real estate purchase, act wisely. Evaluate the specifics of the Phoenix housing market at the time you intend to purchase. These prices are from Realtor.com and can vary from time to time.
The super-hot housing market in Arizona has many other places for real estate investment. The Tucson real estate market is good for investment. Tucson like Phoenix sees a massive influx of snowbirds, and retirees who flock here during the winter. That creates a large, seasonal rental market. The need for many retirees to sell their second homes when they can no longer travel or live independently provides an opportunity to snap up properties at a bargain rate. Better yet, a large number of those properties don’t have a mortgage on them. Other snowbirds sell their condo and move into single-family homes when they decide to stay in Tucson year-round.
Similarly, Scottsdale has a track record of being one of the best long-term real estate investments in the nation if you are an investor. The area contains a mix of families, young professionals, and retirees. There are several reasons to consider investing in Scottsdale real estate. You’ll see better-than-average returns on the average Scottsdale real estate investment property, and its value will be bolstered by a variety of factors. The Scottsdale housing market has a more diverse rental market than just catering to those who can’t afford to buy a single-family home. For example, the area is famous for its snowbirds, and retirees who come for the winter before returning home. This makes Scottsdale a good place for real estate investing.
Chandler is bordered by the cities of Tempe, Mesa, and Phoenix. It is home to about a quarter-million people. There are not suburbs to Chandler, because it is a suburb of Phoenix surrounded by other cities of similar size. However, Chandler has several points in its favor that make it a better choice for real estate investors than surrounding cities. The Chandler area offers strong market fundamentals in addition to a favorable tax and regulatory climate. This is in addition to a plethora of high-paying jobs that attract new residents and niche markets that are willing to pay higher rents in exchange for convenience and proximity to amenities.
Buying or selling real estate, for a majority of investors, is one of the most important decisions they will make. Choosing a real estate professional/counselor continues to be a vital part of this process. They are well-informed about critical factors that affect your specific market areas, such as changes in market conditions, market forecasts, consumer attitudes, best locations, timing, and interest rates.
NORADA REAL ESTATE INVESTMENTS has extensive experience investing in turnkey real estate and cash-flow properties. We strive to set the standard for our industry and inspire others by raising the bar on providing exceptional real estate investment opportunities in many other growth markets in the United States. We can help you succeed by minimizing risk and maximizing the profitability of your investment property in Phoenix.Consult with one of the investment counselors who can help build you a custom portfolio of Phoenix turnkey properties. These are “Cash-Flow Rental Properties” located in some of the best neighborhoods of Phoenix.
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Remember, caveat emptor still applies when buying a property anywhere. Some of the information contained in this article was pulled from third-party sites mentioned under references. Although the information is believed to be reliable, Norada Real Estate Investments makes no representations, warranties, or guarantees, either express or implied, as to whether the information presented is accurate, reliable, or current. All information presented should be independently verified through the references given below. As a general policy, Norada Real Estate Investments makes no claims or assertions about the future housing market conditions across the US.