In this report: An update on current real estate market conditions within the Phoenix metro area with a forecast extending into 2024.
The housing market has been through quite a roller coaster ride over the past three years. The COVID pandemic led to a surge in home-buying activity, causing inventory levels to plummet. During that same timeframe, home prices in Phoenix and most other U.S. cities rose at an unprecedented pace.
But by the second half of 2022, the Phoenix-area housing market had cooled quite a bit. Suddenly, it was taking a lot longer to sell a house, due to a lack of demand from local home buyers.
The next chapter of the story started in early 2023, when the market began to accelerate again. Low inventory levels are once again fueling competition among home buyers, leading to faster sales. Thankfully, we are nowhere near the frenzied pace of 2021. But the market has clearly picked up during the first few months of 2023.
As for 2024, real estate market forecasts for the Phoenix metro area predict that prices will begin to rise at a more moderate pace, following a brief “correction” phase.
Here are the latest trends, forecasts and predictions for the Phoenix housing market extending through this year and into 2024…
Top Phoenix Housing Market Trends in 2023
Here we go again. Inventory levels within the Phoenix-area real estate market have started to drop once more, erasing the gains made during the second half of 2022.
According to a June 2023 housing report from Realtor.com, the total number of active real estate listings in the Phoenix-Mesa-Chandler metro area declined by -16% over the past year. More importantly, the number of new listings declined by a whopping -48% year-over-year.
This report shows that there are fewer homes on the market today when compared to a year ago, and significantly fewer new listings hitting the market.
The larger drop in new listings will affect the Phoenix housing market through the second half of 2023, and possibly into 2024 as well. Among other things, it could increase competition among local home buyers while putting upward pressure on house prices.
Perhaps that’s why some forecasts for the Phoenix real estate market suggest that prices will begin to rise again later this year and into 2024. We’ll get to those long-range predictions in just a moment. But first, let’s take another look at the supply situation, since it’s arguably the most noteworthy trend affecting the Phoenix-area housing market in 2023.
Fewer Homes on the Market in 2023
The chart below shows the months’ worth of supply within the Phoenix real estate market, dating back to just before the pandemic took root in America. This somewhat hypothetical measurement indicates how long it would take to sell off all properties currently listed for sale, at the current sales pace, if no new listings came onto the market.
Basically: a lower number indicates a tighter market with more limited inventory, while a higher number shows there is more supply available for buyers.
You can see where inventory levels declined during the pandemic years, followed by a significant increase through the second half of 2022 as the market cooled. But notice what has happened since the start of 2023. Inventory levels have declined again, month after month, since the start of this year.
This is the same trend identified in the Realtor.com report mentioned above, but based on a different measurement. In both cases, the story is the same. The number of homes listed for sale within the Phoenix metropolitan area real estate market has declined significantly since the start of this year.
Those who are planning to buy a home in the Phoenix area over the coming months should pay close attention to these trends. They could have a profound effect on the housing market going forward. If inventory continues to drop into the second half of 2023 (or even hover at current levels), competition among local home buyers could intensify.
Tight inventory conditions have accelerated the overall pace of the market, resulting in faster home sales. They’re also putting upward pressure on home prices, which could soon bring an end to the Phoenix area’s current downturn in prices.
Rising mortgage rates have contributed to the ongoing inventory decline. Homeowners who purchased their homes three or four years ago have much lower interest rates on their current mortgages than the higher rates of today. This makes them reluctant to sell their homes, even if they wanted to.
These and other conditions have contributed to the inventory decline of the past few months. And it could make things more challenging for home buyers going forward, since rates are expected to hover within their current range for the foreseeable future.
Speaking of the future, let’s shift gears now and look at a recent prediction for the Phoenix-area housing market.
A Temporary Decline in Home Prices
You might be surprised to know that home values across the Phoenix metro area have declined in recent months. This is true for many major cities across the U.S., as we move further into the summer of 2023. After two years of record-breaking gains, house values plateaued during the second half of 2022 and then began to decline.
You can see this trend clearly enough in the chart below, which is based on the Zillow Home Value Index.
But within the Phoenix real estate market, the month-to-month price declines seem to be moderating as of summer 2023. And if history is any indication, home values in the area will hit bottom over the coming months and then begin rising again (at a more moderate pace than the previous three years).
This is exactly what many economists and housing analysts are predicting for the second half of this year and into early 2024. The general consensus is that home values will find a floor in the near future and then begin climbing again at a more normal pace.
Phoenix Real Estate Market Forecast into 2024
Zillow recently issued a home price forecast for the Phoenix housing market into 2024, and it essentially supports everything stated in the previous paragraph.
They predicted last month that the median home value for the Phoenix-Mesa metropolitan area would rise by around 5.8% from May 2023 to May 2024. That would be a positive turnaround from the -5.4% decline that occurred over the past year or so.
Back in the spring, Zillow’s researchers surveyed a group of more than 100 economists and housing market analysts about their expectations for the future. The general consensus among survey respondents was as follows:
“The panel forecasts [U.S. home] prices to slide 1.6% in 2023; growth over the following four years is expected to average 3.5%, equivalent to the long-term average.”
But within the Phoenix, Arizona real estate market, home values could finish their downward “slide” within the next few months. Beyond that, they will likely begin rising at a gradual pace more in line with historical norms.
How can we make such a prediction? Because there is still plenty of demand from buyers within the Phoenix metro area — more so than many other parts of the country. Population growth has something to do with this, so let’s take a look at those trends next.
Significant Population Grown in Recent Years
To summarize, housing market predictions for the Phoenix area through 2023 and into 2024 predict an eventual upturn in home prices. A nationwide real estate cooldown brought on by higher mortgage rates caused prices to fall over the past year. But that downturn probably won’t last much longer, due to steady population growth and buyer demand.
The Phoenix metro area population has grown significantly over the past few years. This has increased the demand for housing in both the rental and purchase sectors.
From July 2021 to July 2022, Maricopa County experienced the most population growth numerically of any county in the United States, according to the Census Bureau. (Maricopa is the central county of the Phoenix-Mesa-Chandler metropolitan statistical area.) During that one-year timeframe, Maricopa County gained nearly 57,000 new residents, bumping the total countywide population up to 4.5 million.
To quote that Census Bureau report:
“Maricopa County, Arizona, remained the largest-gaining county in the nation, adding 56,831 residents in 2022, a gain of 1.3% since 2021. Domestic migration was the component of population change (i.e., births, deaths and migration), which made the largest contribution to Maricopa County’s growth.”
A Popular Destination for Bargain Hunters, Retirees
In this context, “domestic migration” refers to people moving from other parts of the country into the Phoenix metro area. This shows that the Valley of the Sun is one of the most popular destinations for relocating Americans.
People relocate into the Phoenix area for a number of reasons:
- Cost of living: The cost of living in Phoenix is relatively low compared to other major cities in the United States. This is especially true for housing prices, which are significantly cheaper in Phoenix than in places like Los Angeles, San Francisco, or New York City.
- Weather: Central Arizona has a warm, sunny climate year-round. This is a major draw for people who are tired of the cold winters in other parts of the country.
- Job opportunities: The Phoenix area is home to a growing number of businesses and industries, with an unemployment rate that’s currently below the national average.
- Retirement: Phoenix is a popular destination for retirees and has been for many decades. Retirees relocate there to enjoy the warm weather, low cost of living, and abundance of activities and amenities.
This is partly why the Phoenix metro area has experienced such tight supply conditions over the past few years, even before the home-buying surge brought on by the pandemic. It’s also one of the reasons why Phoenix housing market predictions suggest that prices will begin rising again later this year.
After all, all of those new residents need somewhere to live. Some of them will be long-term renters, while others will enter the housing market soon after relocating. In short, this population growth trend reduces supply, increases demand, and puts upward pressure on home values all across the Phoenix-area real estate market.
Fast Facts: The Phoenix Metro Area at a Glance
- The Phoenix metropolitan area, also known as the Valley of the Sun or simply “The Valley,” is located in central Arizona in the Southwestern United States.
- It is currently the tenth-largest metropolitan area in the United States by population, with an estimated population of over 4.9 million people as of 2021.
- The Phoenix metro covers approximately 14,600 square miles (37,800 square kilometers), making it one of the largest U.S. metropolitan areas in terms of total land area.
- This region experiences a desert climate, characterized by hot summers and mild winters. It receives plenty of sunshine throughout the year, with more than 300 sunny days on average.
- On average, the Phoenix area only receives about 9 inches of rain annually, significantly less than the national average of around 30 inches.
- The Phoenix metropolitan area has a diverse economy, led by the real estate, finance, healthcare, education and tourism industries. It’s home to several major corporations, including Intel, Honeywell, American Express, and PetSmart.
Disclaimer: This article includes forecasts and predictions for the Phoenix, Arizona real estate market extending into 2024. Such predictions are the equivalent of an educated guess and should be treated as such. The Home Buying Institute makes no claims about future housing or economic conditions.
Brandon Cornett is a veteran real estate market analyst, reporter, and creator of the Home Buying Institute. He has been covering the U.S. real estate market for more than 15 years. About the author