The Phoenix housing market has been a focal point of interest for homebuyers, sellers, and investors alike, offering a dynamic landscape of opportunities and challenges. As we delve into 2023, it becomes crucial to understand the prevailing prices, trends, and forecasts that shape the real estate landscape in the Valley of the Sun.
In this analysis, we will explore the key factors influencing the Phoenix housing market, including the latest pricing trends, shifts in demand and supply, and a forward-looking forecast that provides valuable insights for those navigating the real estate landscape. Whether you're a potential homebuyer or seller, an investor seeking growth opportunities, or simply a keen observer of the market, it will help you to uncover the Phoenix housing market's current state and its projected trajectory in 2023.
ALSO READ: Arizona housing market forecast 2023
Phoenix Housing Market Trends 2023 [July]
Phoenix Metro Area: According to the Arizona Regional Multiple Listing Service, the Phoenix housing market in July 2023, the Phoenix housing market has experienced notable fluctuations in recent months, with key indicators reflecting both challenges and potential opportunities for buyers and sellers. Let us explore sales numbers, inventory changes, pricing shifts, and more.
The housing statistics for July 2023 provide a comprehensive snapshot of the market's performance:
- Monthly Sales Volume: Down 20.4% MoM and Down 3.1% YoY
- Median Sales Price: Down 4.1% YoY and Down 1.8% MoM
- New Inventory: Down 39.3% YoY
- Total Inventory: Down 31.7% YoY
It's noteworthy that July's 5,775 home sales marked the second-lowest July ever reported, with 2007 being the lowest on record.
Declining Sales Numbers
The Phoenix housing market witnessed a 20.4% month-over-month decline in sales volume in July 2023. The year-over-year comparison is also down by 3.1%. This decrease in sales volume raises questions about the underlying factors contributing to the decline in buyer activity.
The total inventory in the Phoenix market experienced a 1.8% month-over-month decrease. When compared to the same month last year, the inventory shows a significant decline of 31.7%. This decrease in available properties could impact the choices available to potential buyers and affect the overall market dynamics.
The months supply of inventory for June was 1.99, reflecting the low inventory conditions. July saw a slight increase in the supply, with the figure rising to 2.45. This metric provides insights into the balance between supply and demand in the housing market.
The average sales price in Phoenix displayed a modest increase of +1.4% year-over-year. However, the median sales price experienced a decline of -4.1% year-over-year. The forecast for August suggests that average sale prices will continue to rise, while median sale prices are expected to remain unchanged.
Days on Market
The days on market metric provides insights into the speed at which homes are being sold. Year-over-year, the figure increased by +26 days, reflecting a trend toward longer market exposure. However, the month-over-month comparison shows a decline of -7 days, indicating a potential shift in market dynamics.
ARMLS Pending Price Index (PPI)
The ARMLS Pending Price Index offers valuable insights into future price projections. The median sales price for July was projected at $430,000, with the actual amount recorded as $434,990. Looking ahead to August, the index forecasts a flat median sales price of $435,000. The projection indicates a potential decrease of 2.25% year over year and a decline of 8.42% from the record high reported in June 2022.
As of the beginning of August, there were 4,624 pending contracts, 2,357 UCB listings, and 346 CCBS listings, totaling 7,327 residential listings practically under contract. This figure reflects a 4.71% decrease in pending contracts compared to the previous year.
As we anticipate the release of August's housing numbers, it's projected that both year-over-year and month-over-month sales volume will experience a decline.
These stats show that the Phoenix housing market in July 2023 showcased a mixed bag of trends, with declining sales volume, shifting inventory, and variations in pricing. The dynamic nature of these indicators suggests a market that is in flux, responding to both local and broader economic factors. As the year progresses, it will be crucial to monitor how these trends evolve and whether the projected changes in pricing come to fruition. For potential buyers and sellers, staying informed about these trends is essential for making informed decisions in this ever-changing housing landscape.
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. When evaluating the Phoenix and Maricopa County housing markets in July 2023, it is evident that both areas are experiencing seller's markets. A seller's market means that there are more buyers looking for homes than there are homes available for sale. Let's delve into the data for each area to understand the market conditions better.
Median Listing Home Price and Price per Square Foot
In July 2023, the median listing home price in Phoenix, AZ stood at $525,000, showing an impressive year-over-year increase of 9.4%. The median listing home price per square foot was $302. Additionally, the median home sold price was $438,000.
Sale-to-List Price Ratio
The sale-to-list price ratio in Phoenix, AZ for July 2023 was 99.71%. This indicates that, on average, homes were sold for nearly the asking price during this period. The data reflects a high level of buyer interest and competition in the market.
Seller's Market Status
Based on the available data, Phoenix, AZ is classified as a seller's market in July 2023. This designation implies that the demand for homes is exceeding the supply. In other words, there are more potential buyers actively searching for homes than there are homes available for sale. This market condition often leads to competitive bidding and a higher likelihood of homes selling quickly.
Median Days on Market
On average, homes in Phoenix, AZ sell after 35 days on the market. The median days on market is an essential metric that reflects the pace of sales. Comparing to the previous month, the trend for median days on the market has decreased, indicating a potentially faster sales process. However, when compared to the same month last year, the metric has slightly increased.
Phoenix consists of 38 neighborhoods with varying real estate dynamics. The Arcadia neighborhood stands out with a median listing home price of $1.7 million, making it the most expensive neighborhood. Conversely, Central City South is the most affordable neighborhood, with a median listing home price of $287,300.
Maricopa County Overview
Maricopa County also experiences a seller's market in July 2023. The median listing home price for the county is $547,000, reflecting a 4.2% year-over-year increase. The sale-to-list price ratio is 99.52%, indicating a similar trend of homes selling close to the asking price.
The median days on market for Maricopa County is 39 days, with a similar trend of slight decrease compared to the previous month and slight increase compared to the previous year.
Maricopa County comprises 43 cities, each with its own real estate dynamics. The most expensive city is Paradise Valley with a median listing home price of $4.7 million, while Sun City is the most affordable city with a median listing home price of $299,900.
With rising median listing home prices, high sale-to-list price ratios, and short median days on market, both Phoenix and Maricopa County are experiencing seller's market conditions in July 2023. The competition among potential buyers and limited housing supply contribute to a dynamic and fast-paced real estate landscape. Aspiring homebuyers and sellers should stay updated on the market trends and seek professional guidance to navigate these conditions effectively.
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 Phoenix housing market has been a focal point of interest for potential buyers, sellers, and investors alike. In this article, we delve into the July 2023 housing market data and explore forecasts for the Phoenix-Mesa-Scottsdale area. With insights from Zillow and other key indicators, we aim to provide a comprehensive view of the current state and potential future trends of the Phoenix housing market.
Current Market Snapshot
As of July 31, 2023, the average home value in the Phoenix-Mesa-Scottsdale area stands at $444,816. This figure reflects a 7.1% decrease over the past year, indicating a significant shift in the market dynamics. Additionally, homes in the area are going pending in approximately 22 days, highlighting the brisk pace of transactions.
Zillow's 1-year market forecast for the Phoenix housing market projects a growth rate of 6.9% as of July 31, 2023. This forecast suggests cautious optimism, indicating a potential recovery from the recent decrease in home values. It's important to note that market forecasts are subject to various factors, and actual outcomes may vary.
Sale to List Ratio
The median sale to list ratio as of June 30, 2023, is 0.994. This metric provides insights into the relationship between the listing price of homes and the final price at which they are sold. A ratio close to 1 indicates that homes are generally selling close to their listed prices.
Sales Price Trends
Examining the sales price trends, 21.2% of sales as of June 30, 2023, were recorded to be over the list price, indicating competitive market conditions. On the other hand, 53.3% of sales were below the list price, showcasing a variety of transaction scenarios.
Days to Pending
The median days to pending in the Phoenix-Mesa-Scottsdale area is 22 days as of July 31, 2023. This metric represents the time it takes for a home to go from listing to being under contract. A shorter duration suggests a high demand for homes and a fast-paced market environment.
As with any market forecast, it's important to consider that projections are based on available data and anticipated trends, but actual outcomes may vary due to unforeseen economic or social factors. Whether you're a potential buyer, seller, or investor, staying informed about market trends, seeking professional guidance, and conducting thorough research are essential steps to navigating the Phoenix housing market successfully.
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. 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 August 2023, the average rent for a 1-bedroom apartment in Phoenix, AZ is currently $1,323. This is a 9% decrease compared to the previous year. Over the past month, the average rent for a studio apartment in Phoenix remained flat. The average rent for a 1-bedroom apartment decreased by -2% to $1,323, and the average rent for a 2-bedroom apartment decreased by -2% to $1,600.
- Two-bedroom apartment rents average $1,600 (a 6% decrease from last year).
- Three-bedroom apartment rents average $2,245 (a 2% increase from last year).
- Four-bedroom apartment rents average $2,595 (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 $1,337 last month. Fountain Hills was the most expensive city with one bedrooms priced at $1,990 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%)
- Buckeye had the fastest growing rent, up 26.3% since this time last year.
- Flagstaff saw rent climb 15.4%, making it second.
- Casa Grande was third with rent jumping 14.3%.
The Fastest Growing Cities For Rents in Phoenix Metro Area (M/M%)
- Fountain Hills had the largest monthly growth rate, up 5.9%.
- Lake Havasu City rent increased 4.5% last month, making it second.
- Glendale was third with rent climbing 3.2%.
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.