Arizona is known for its vast desert landscapes and sunny climate. It's a densely populated state that continues to attract more and more people. Did you know its population has increased by 860,000 residents over the past decade?

Therefore, the Arizona real estate market is something worth considering. Is it expected to grow or crash? Should you consider renting out your property? What are the Arizona housing market predictions after the Covid-19 pandemic? Here's what you need to know!

Arizona Housing Market Trends

Even though the Covid-19 pandemic caused the AZ housing market to slow down temporarily, it has been showing a steady increase over the past few years. According to Zillow, the median price of a home in Arizona is $409,038 (at the time of writing).

Overall, it's believed that the Arizona housing market will stay competitive in 2023 as most areas are showing slight increases or decreases in the value of property.

Supply and Demand

Prospective buyers might re-enter the market in 2023 if mortgage rates start to decline, which would boost demand. The key takeaway from the housing scarcity is that, according to analysts, home prices in the Arizona housing market could continue to increase modestly in 2023.

However, when looking at the supply side of things, sellers seem to have the upper hand. The fact is that there is a severe imbalance between supply and demand, which is continuing to drive up the cost of homes in Arizona. This explains partly why the projection for the future of the Arizona real estate market is a little bit audacious.

Arizona's Economy

The state of Arizona's economy is also strong, but it faces challenges from high levels of inflation and escalating housing costs. Hence, there is also a concern regarding the fact that wages aren't keeping up with the rising costs of housing.

At least in a healthy market, buyers tend to leave the market more often as prices increase more quickly. Mortgage rates have an effect on this as well. Interest rates have maintained historically low levels for the last few years.

This is one of the factors that increased home purchases across the nation. Rate increases could cause a broad cooling trend in the Arizona real estate market. The continuous supply gap, however, is anticipated to "outweigh" this impact and ensure that the AZ housing market will remain competitive well into 2023.

Factors Affecting the Arizona Housing Market

While there are various factors that affect the Arizona real estate market, the following are the most prevalent when assessing the current trends and statistics:

  1. Population Growth: Arizona's population has been growing at a fast rate. This is due to the low cost of living, warm weather, and the strong job market. Naturally, the more people that move to a state, the higher the demand for homes.
  2. Low-interest Rates: While the Federal Reserve's decision to keep interest rates low has multiple benefits, one of the main advantages is that has made borrowing money for home purchases more affordable, resulting in increased demand.
  3. Job Growth: As more and more companies expand into Arizona, the job market continues to grow. People looking for jobs need houses, resulting in increased demand for property.
  4. Limited Housing Inventory: One of the main factors leading to increased median home prices is the limited supply of homes in the housing markets. Most property owners are deciding to hold onto their homes rather than sell them, resulting in a lack of supply.

Will the Housing Market Crash in Arizona?

While many economists believe the Arizona housing market will slow down, they do not see it crashing. Therefore, even though homeowners can expect prices to fall, they don't have to worry about severe situations, such as those experienced during the Great Recession.

Need some more convincing? Here are a few more reasons why the housing market won't crash in Arizona:

1.    A Lower Supply of Newly Constructed Houses

The availability of newly built homes has not yet reached pre-2007 levels. Additionally, people cannot purchase land, obtain regulatory licenses, and rapidly boost supply.

2.    Low Inventory

Only a 3.2-month supply is present in the inventory, according to August 2022 statistics. Because there is still a shortage of available inventory, many buyers are compelled to bid up prices. Additionally, the supply-demand curve suggests that prices won't crash immediately.

3.    Decrease in Foreclosures

Many homeowners have a sizable amount of equity. Homeowners' personal balance sheets are significantly healthier now than they were 15 years ago, which is a glaring distinction between now and when the Great Recession occurred. Therefore, there is a reduced risk of a foreclosure crisis.

4.    New Buyers

There is a high demand for houses across numerous demographics. In fact, different groups of people, such as Hispanics and millennials, are in their prime buying years. This demand means there is limited inventory, which increases home prices.

5.    Strict Lending Standards

There were numerous instances of liar loans back in 2007. Lenders used to give mortgages to anyone in the past without doing a credit check or requesting a down payment. Lenders now have rigorous requirements for borrowers, and the majority of those who obtain mortgages have great credit scores.

Arizona Housing Market Statistics

Are you interested in the Arizona real estate market's statistics? Take a look at these:

  • Lenders repossessed 3,938 US properties in August 2022 through completed foreclosures or "real estate owned" (REO). Illinois had the most foreclosures, coming in at 493, according to ATTOM.
  • As of August 2022, 34 501 homes in the United States had foreclosure filings, consisting of scheduled auctions, default notices, or bank repossessions, according to ATTOM Data Solutions.
  • There was a 7.7% home appreciation rate from August 2021 - August 2022, as per the NAR.
  • In the second quarter of 2022, housing affordability declined significantly due to the fact that monthly mortgage payments on normal single-family homes with 20% down payments increased by approximately one-third from Q1 and half from 2021.
  • In August 2022, Illinois had one foreclosure filing for every 1,926 housing units, which was the highest rate according to ATTOM. Delaware came in second, with one out of every 2,387 housing units being in some stage of the foreclosure process.
  • Pending home sales declined for the fourth consecutive month in September. The monthly rate decreased by over 10.2%, while the yearly rate fell by 31%.
  • In the eighth month, the median sale price of a home was $384 800, which was an 8.4% increase from the previous year. Furthermore, existing home sales decreased to a 4.71 million adjusted annual rate.

Housing Market Predictions

Here are a few general real estate market predictions based on analysts' forecasts:

Lower Home Affordability

While analysts believe home prices will keep falling, they don't believe it will be a dramatic decrease, and it certainly won't be enough to offset high-interest rates. Therefore, homes might seem less affordable, and monthly mortgage payments will remain high.

Lower Home Prices

Many experts believe that home prices won't decrease because of limited supply; however, others believe that the higher interest rates will force sellers to drop their prices.

Higher Mortgage Rates

Professionals believe that mortgage rates will keep increasing because of geopolitical tensions, a possible recession, and continued inflation.

Decreased Home Sales

Higher mortgage and interest rates will probably result in a decrease in the number of homes sold, meaning that the median days to sell a house will increase.

Arizona Housing Market Predictions

After two years of a boom, the housing markets in some parts of Arizona are already cooling off, but overall, things appear to be more balanced.

In a large portion of the state, the market is returning to normal, which means that prices aren't rising as quickly as they previously did and that potential buyers and sellers are once again engaging in negotiations. This is consistent with the general picture for the United States, which indicates that while real estate is slowing, a crash is not anticipated.

However, there are always opposing viewpoints when speculating on the market's future, and according to some reports, the state's sustained low inventory indicates sellers may continue to hold the upper hand for some time to come.

Final Verdict

Since the Covid-19 outbreak, the property market in Arizona has been scorching, but it is now cooling quite quickly. Although prices may decrease, they won't be to the same degree as during the Great Recession. Homeowners now have significantly stronger personal balance sheets than they did 15 years ago.

A typical mortgage borrower has a fixed-rate mortgage with a rate considerably below 5%, great credit, and significant equity. Therefore, there is no impending catastrophe related to foreclosures.

Additionally, contractors have been careful in their development pace since they have vivid memories of the Great Recession.

Therefore, if there is a high demand for property in your area, you could benefit from selling your home while there is a slow market. If you need assistance, don't hesitate to reach out to a real estate agent.


Is the Arizona Real Estate Market Showing Signs of a Housing Bubble?

A housing bubble takes place when home prices increase rapidly because people are buying properties purely for investment purposes rather than for fundamental values.

The Arizona housing market is not showing any signs of a bubble, and while prices are increasing rapidly in certain areas, the increases are not driven by speculative purposes.

What Is the Phoenix Housing Market Like?

As the most densely populated city in Arizona, Phoenix contributes a great deal to Arizona's real estate market.

According to Zillow, the median home price of a property in Phoenix is $398 098 (at the time of writing), which is fairly close to the average in Arizona. Therefore, the trends in Phoenix are quite similar to those of Arizona.

Frequently Asked Quesitons

David is the co-founder & CMO of DoorLoop, a best-selling author, legal CLE speaker, and real estate investor. When he's not hanging with his three children, he's writing articles here!

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The information on this website is from public sources, for informational purposes only and not intended for legal or accounting advice. DoorLoop does not guarantee its accuracy and is not liable for any damages or inaccuracies.