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. This housing market has indeed experienced a roller coaster ride in recent years. The unprecedented growth during the pandemic was followed by a cooling off in 2023 due to rising interest rates and inflation. However, there are still positive aspects to consider, and Phoenix remains a sought-after destination for buyers and investors.
Phoenix Housing Market Trends in 2023 – New Data
Key Market Trends
- Median Home Prices: According to Redfin, the median sales price for a home in Phoenix in September 2023 was $440,000, reflecting a 2.3% increase from the previous year. Although this growth rate is slower than the preceding year's 24.3%, it still signifies a rise in home prices.
- Inventory: While inventory has been increasing, it remains relatively low. The heightened demand leads to a competitive market, necessitating swift decisions from buyers when a suitable property is found.
- Days on Market: The average time a home spends on the market has increased to 35 days in September 2023, compared to 29 days in the same month of the previous year. This indicates that buyers are taking more time to decide, suggesting a more balanced market.
- Interest Rates: Mortgage rates have risen, with the average for a 30-year fixed-rate loan surpassing 6%. Higher interest rates impact affordability for potential buyers.
ALSO READ: Arizona housing market forecast 2023
Market Outlook and Pricing Trends
While median home prices have continued to rise, the rate of growth has slowed down in 2023. The increase of 2.3% compared to the previous year's 24.3% growth indicates a moderation in the market. However, the market remains competitive, albeit favoring buyers more than in previous years.
As for whether Phoenix housing prices are dropping, the data shows a slower growth rate rather than a decline. The market is undergoing an adjustment period after the rapid growth seen during the pandemic, and this could be seen as a positive development, allowing the market to stabilize.
Phoenix MSA Housing Statistics
As of August 2023, the Phoenix Metro Area housing market is navigating a period of change, with varying trends in sales, inventory, supply, and pricing. The month-over-month sales increase and a rise in available inventory suggest a relatively active market.
However, the year-over-year comparison indicates a more tempered growth rate and a notable reduction in inventory compared to the previous year. Let's delve into the data from the Arizona Regional Multiple Listing Service to understand the recent developments.
- Home Sales: In terms of sales, the Phoenix Metro Area has seen a +5.5% month-over-month increase, indicating a positive momentum in recent activity. However, the year-over-year comparison shows a slight dip of -0.7%, suggesting a more subdued growth pattern when considering a longer time frame.
- Inventory Insights: The inventory levels have seen interesting changes. There is a +2.9% month-over-month increase, demonstrating a rise in available properties in a shorter time frame. However, the year-over-year comparison reflects a substantial decrease of -33.3%, indicating a significant reduction in available housing stock compared to the same period last year.
- Supply and Demand: The months' supply of inventory is a crucial metric for understanding the balance of supply and demand. In July, the supply stood at 2.45 months, slightly decreasing to 2.39 months in August. This indicates a relatively low supply, suggesting a market that may still favor sellers, although the slight decrease from July to August could be a sign of evolving dynamics.
- Housing Price Trends: Examining the pricing trends, the average sales price has shown a +0.4% year-over-year increase, implying a modest rise in prices. However, the median sales price has experienced a decline of -2.2% year-over-year. This divergence between the average and median prices might indicate variations in property types or locations, affecting the overall median.
Phoenix Housing Market Forecast: What to Expect in 2023?
The Phoenix housing market has been one of the hottest in the country in recent years. With a growing economy, strong job market, and desirable climate, it's no wonder that people are flocking to the Valley of the Sun.
But what's ahead for the Phoenix housing market? Here's a look at some of the key trends to expect:
Home prices will continue to rise, but at a slower pace.
Home prices in Phoenix have been rising steadily for several years, and that trend is expected to continue in 2023. However, the rate of growth is likely to slow somewhat. This is due to a number of factors, including rising interest rates and a decline in inventory.
According to the National Association of Realtors, home prices in Phoenix are expected to rise by 5.7% in 2023. This is down from the 15.8% increase that was seen in 2022.
Inventory will remain low.
One of the biggest challenges facing the Phoenix housing market is a lack of inventory. There are simply more buyers than there are homes for sale. This is driving up prices and making it difficult for buyers to find the right home.
The low inventory is expected to continue in 2023. This is due to a number of factors, including rising construction costs and a shortage of labor.
Buyers will need to be prepared to act quickly.
In a competitive market, buyers need to be prepared to act quickly when they find a home they love. This means having their financing in place and being ready to make an offer right away.
Buyers should also be prepared to compromise. They may not be able to get everything they want in a home, but they should be willing to make some sacrifices in order to get into the market.
The rental market will remain strong.
The rental market in Phoenix is expected to remain strong in 2023. This is due to a number of factors, including the low inventory of homes for sale and the growing number of people moving to the Valley of the Sun.
Renters can expect to see higher prices in 2023. However, there will still be a good selection of rentals available.
Overall, the Phoenix housing market is expected to remain strong in 2023. Home prices will continue to rise, but at a slower pace. Inventory will remain low, so buyers will need to be prepared to act quickly. The rental market will also remain strong.
Phoenix Housing Market Predictions 2024
The Phoenix-Mesa-Scottsdale area has been a focal point in the real estate market due to its consistent growth and popularity. As we look ahead to 2024, we anticipate several trends based on the current market data and analyses.
Current Market Data
According to Zillow, the average home value in the Phoenix-Mesa-Scottsdale area is $449,628, reflecting a 7.0% decrease over the past year. Homes are going to under contract in approximately 20 days. Other key metrics for the area include a 3.2% 1-year market forecast as of September 30, 2023, a median sale-to-list ratio of 0.999 as of August 31, 2023, 24.3% of sales over list price, and 49.8% of sales under list price as of August 31, 2023.
2024 Market Predictions
Home prices in Phoenix are anticipated to experience a 3.2% increase by September 2024. This projection suggests a continued growth trend in the housing market, indicating a favorable outlook for potential homebuyers and investors in the Phoenix area.
- Moderate Stabilization: It's expected that the market will stabilize, and home prices may see a more moderate and balanced growth. The sharp decline observed in recent times might indicate a period of adjustment and equilibrium.
- Potential Price Adjustments: While the market is stabilizing, there may still be some price adjustments in certain areas. These adjustments could be influenced by factors like economic conditions, interest rates, and local housing supply.
- Continued Demand: The demand for homes in the Phoenix area is likely to remain relatively high, especially with its attractive features such as a robust job market, good climate, and lifestyle amenities. This sustained demand will play a role in supporting home prices.
- Market Resilience: The housing market in Phoenix has shown resilience in the face of various economic challenges. While a crash is not predicted, economic changes and unforeseen events can always influence the market, so continued monitoring is essential.
Addressing Concerns: Will Phoenix Home Prices Drop in 2024? Will the Housing Market Crash Again?
Based on the data and predictions, a significant crash in the Phoenix housing market in 2024 is not anticipated. However, fluctuations and adjustments in home prices might occur. These changes are typical in a dynamic market and are influenced by various economic and regional factors. It's essential for potential buyers and sellers to stay informed and work with real estate professionals to navigate the market effectively.
Overall, the Phoenix-Mesa-Scottsdale area's housing market is likely to remain a significant player in the real estate landscape, offering opportunities for both buyers and sellers, albeit with a more stabilized growth trajectory.
Is Phoenix a Good Place to Invest in Real Estate?
Investing in real estate is a significant decision that requires careful consideration of various factors. The Phoenix Metropolitan Statistical Area (MSA) has been a popular choice for real estate investment due to several compelling reasons supported by factual data:
1. Strong Population Growth
The Phoenix MSA has consistently experienced robust population growth. According to the U.S. Census Bureau, Phoenix was one of the fastest-growing cities in the United States. The increasing population creates a steady demand for housing, making it an attractive market for real estate investment.
2. Thriving Job Market
Phoenix boasts a diverse and thriving job market. The city has become a hub for various industries, including technology, healthcare, manufacturing, and finance. Employment growth stimulates demand for housing, which is a key driver for real estate investment. As of the latest available data, the unemployment rate in the Phoenix MSA is relatively low compared to the national average, indicating a stable job market.
3. Favorable Economic Environment
Phoenix offers a business-friendly environment, attracting corporations and entrepreneurs. The favorable economic conditions contribute to a strong real estate market. According to data from the Greater Phoenix Economic Council, the region has seen consistent economic growth, supporting real estate development and investment.
4. Affordable Housing Market
Compared to other major cities in the United States, the Phoenix MSA offers relatively affordable housing options. The cost of living and housing prices, although rising, is still attractive when compared to cities like Los Angeles, San Francisco, or New York. This affordability makes it appealing to both buyers and renters, increasing the potential for return on investment.
5. Tourism and Lifestyle Appeal
Phoenix is a popular tourist destination, attracting visitors throughout the year. The tourism industry contributes to the demand for short-term rental properties, making it a lucrative venture for real estate investors. Additionally, the city's favorable climate and lifestyle amenities make it an appealing location for both residents and investors.
6. Infrastructure and Development
The Phoenix MSA has witnessed substantial infrastructure development to accommodate its growing population and economy. Investments in transportation, education, healthcare, and other amenities enhance the overall quality of life, making the region more attractive for real estate investment.
Considering these factors, the Phoenix Metropolitan Statistical Area presents a compelling opportunity for real estate investment. However, it's essential to conduct thorough market research, consult with real estate professionals, and assess your investment goals before making any investment decisions.
7. Strong Demand for Rental Properties
Phoenix has experienced a significant influx of residents in recent years, driven by factors such as job opportunities, affordable living, and a desirable climate. Many newcomers initially opt for rental housing, creating a robust demand for rental properties. This demand is projected to continue as the population grows.
Rental rates in Phoenix have been steadily rising due to the high demand for rental properties and the overall growth of the area. While still more affordable than some major cities, rental rates have seen a notable increase, providing a potential for a favorable return on investment for property owners.
Phoenix's lower cost of living and relatively affordable rental rates compared to major cities make it an attractive option for individuals and families looking to rent. The affordability factor contributes to the sustained demand for rental properties in the area.
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 to find 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%.
Tips for Buying and Renting a Home in the Phoenix Housing Market
Buying a Home:
- Get Pre-Approved for a Mortgage: Obtain pre-approval for a mortgage before beginning your home search to understand your budget and enhance your appeal to sellers.
- Act Quickly: Be prepared to make an offer swiftly when you find a home you love, as the Phoenix housing market is highly competitive and homes sell fast.
- Be Willing to Compromise: Recognize that you may need to make concessions in order to enter the market, as it may be challenging to find a home that meets all your preferences.
- Work with a Qualified Real Estate Agent: Collaborate with a proficient real estate agent to assist you in finding the right home and negotiating the best possible price.
Renting a Home:
- Start Your Search Early: Initiate your search well in advance since the rental market in Phoenix is highly competitive, and the best homes are often leased quickly.
- Act Quickly on Desired Homes: If you find a rental property you love, be prepared to act swiftly, given the competitiveness of the Phoenix rental market.
- Be Prepared for a Deposit: Expect to pay a deposit, typically equivalent to one month's rent, as most landlords require it as part of the rental agreement.
- Be Ready to Sign a Lease: Leases in Phoenix usually run for one year, although short-term leases may also be available based on your needs and preferences.
- Engage a Skilled Real Estate Agent: Partner with an experienced real estate agent to assist you in finding the right rental home and negotiating an optimal rental agreement.