Every January, HBI answers some of the biggest (and recurring) questions among home buyers within the real estate markets we cover. It has become a time-honored tradition.
Today, we’ll tackle that thorny but common question among Phoenix-area residents:
“Will the Phoenix housing market crash or experience a major downturn in 2025?”
The short answer: While no one can predict future real estate trends with complete accuracy, it’s highly unlikely that the Phoenix area will see a market crash anytime soon.
The Real Estate Market Crash Defined
Before we address any specific real estate trends in Phoenix, we need to clear up some of the terminology being used here.
Definition: A real estate market crash is a rapid and significant decline in home prices, often accompanied by increased foreclosures and a sharp reduction in sales volume. They’re often triggered by underlying systemic issues within the economy or lending practices.
But that doesn’t mean that every drop in home prices qualifies as a “crash.” Sometimes, home values within a particular housing market decline as part of a milder “correction,” often following a period of rapid and unsustainable growth.
For example, Phoenix metro area home prices dropped slightly from summer 2022 to spring 2023, following the rapid rise brought on by the pandemic-fueled home buying surge.
This was a case of home prices self-correcting after rising too far, too fast. And that same pattern occurred in most other U.S. metro areas.
But it doesn’t constitute a housing market crash because it lacks the other defining traits, including those listed below.
Signs, Symptoms, and Consequences
Here’s what usually occurs during a full-on real estate market crash:
- Rapid Price Decline: Home prices drop significantly in a short period, often by 20% or more.
- Reduced Sales: Fewer people attempt to buy homes, as uncertainty and fear grip the market. This further depresses prices as sellers compete for a shrinking pool of buyers.
- More Foreclosures: Many homeowners face foreclosure due to economic stress, falling home values, or inability to meet mortgage payments.
- Supply Surplus: A surplus of homes on the market drives prices down further, as demand cannot keep up with supply.
- Economic Instability: Crashes often occur alongside economic downturns, such as a recession, high unemployment, or a banking crisis.
- Broad Impact: A crash can affect not only homeowners but also lenders, investors, and industries tied to real estate.
- Extended Duration: Unlike a temporary downturn, a crash persists for a longer period, often taking years for the market to fully recover.
The Phoenix-area real estate market is experiencing none of these things at the start of 2025, but rather appears to be on solid ground.
That’s not to say a housing market crash couldn’t occur in the near future—just that it’s highly unlikely based on current economic conditions.
Why It’s Not Likely to Happen in Phoenix
If a picture is worth a thousand words, the following graph speaks volumes.
It shows the median home price for the Phoenix area over the past eight years or so. The labels show key stages, starting with the pandemic and ending with the flatline going into 2025.
As you can see from this graph, this market experienced a brief and shallow drop in home prices starting in the summer of 2022. That’s an example of a housing market correction, in which price growth halts and then reverses as the market cools.
From mid-2022 into early 2024, that same pattern played out in most U.S. cities. And like the Phoenix area, many of those other housing markets have since rebounded.
This is another reason why a real estate market crash in Phoenix is unlikely. Home prices in this market have experienced a “reality check” and are essentially flat going into 2025. The days of rapid and unsustainable price growth are over—at least for now.
Flashback: Phoenix Market Crash of 2007
To recap: a housing market crash or prolonged downturn in the Phoenix metro area appears highly unlikely at the start of 2025.
But this scenario has happened before, and we would do well to remember that.
From 2007 to 2010, the Phoenix real estate market experienced a deep and prolonged decline in home values. This was part of the subprime mortgage crisis that led to the Great Recession.
That housing market crash was not limited to the Phoenix area. During that timeframe, real estate markets all across the U.S. saw plummeting home prices combined with a surge in foreclosures.
As a result of this economic calamity, many homeowners in Phoenix and elsewhere eventually became “upside down” or underwater in their mortgage loans. They ended up owing more on their mortgage loans than their homes were worth.
During the last major housing market crash, the median home price in the Phoenix area dropped by around 53% from the bubble peak of 2006. So a person who paid $200,000 for a home in 2006 might have watched its value drop to $94,000—all within a four-year span.
That’s what a housing market crash looks like.
But a lot has changed since the subprime mortgage crisis of 2007 to 2010. Stricter lending standards and regulatory oversight have eliminated or curtailed some of the risky mortgage products of the past (for the time being).
Bottom line: A Phoenix real estate market crash is less likely in 2025, partly due to sensible mortgage lending rules and practices.
Two Positive Projections for Home Prices
Researchers from Realtor.com recently predicted that the Phoenix-Mesa-Chandler metro area could be one of the hottest housing markets of 2025.
Specifically, they predicted that Phoenix would outperform most of the nation’s other major metro areas, in terms of home price and sales growth.
To quote their December 2024 forecast report:
“The top 10 markets for 2025 are exclusively in the South and West. In rank order, they are: 1) Colorado Springs, Colo.; 2) Miami-Fort Lauderdale-Pompano Beach, Fla.; 3) Virginia Beach-Norfolk-Newport News, Va.-N.C.; 4) El Paso, Texas; 5) Richmond, Va.; 6) Orlando-Kissimmee-Sanford, Fla.; 7) McAllen-Edinburg-Mission, Texas; 8) Phoenix-Mesa-Chandler, Ariz.; 9) Atlanta-Sandy Springs-Alpharetta, Ga.; 10) Greensboro-High Point, N.C.”
Realtor.com offered the following predictions for the Phoenix area:
- 2025 existing home sales, year-over-year: +12.2%
- 2025 existing home price, year-over-year: +13.2%
We consider this forecast to be a bit bullish. With home prices in this market essentially flat going into 2025, it’s hard to imagine them rising by double digits through the rest of the year.
Zillow recently predicted that the median price for this metro area would rise by around 1.7% during 2025 (specifically, from November 2024 to November 2025). That’s arguably a more realistic projection, compared to the Realtor.com forecast.
The takeaway: Housing analysts expect Phoenix-area home prices to rise in 2025, to some degree. And that’s the opposite of a crash.
Disclaimer: This report contains forward-looking views relating to real estate market trends in the Phoenix area. Such views are the equivalent of an educated guess and should be treated as such. The Home Buying Institute makes no claims about future housing trends.
Brandon Cornett
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