Recent projections for the Arizona housing market indicate that home prices may continue to rise steadily through 2022 and into 2023. The AZ housing market has experienced two consecutive years of record-breaking price rises. Home prices continue to rise as a result of a lack of available properties and high buyer demand. Arizona’s real estate market experienced a historic price increase last year.
According to real estate data provider Zillow, the typical property value in Arizona has increased by a staggering 26.3% from June 2021 to June 2022. The typical value of homes in Arizona is now $450,629. Home values in AZ have risen by 59% over the past two years and 97% over the past five years. The housing analysts provide an optimistic housing market forecast for the Arizona region until 2023. Zillow’s prediction for Phoenix MSA is a 10.6% growth in home prices by the end of June 2023.
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The graph below depicts the median or average house value in the region over a number of years. Migration patterns, according to some analysts, are the fundamental reason for this hot housing market. Arizona continues to get a significant number of residents from California, Texas, Illinois, and Washington. There is a limited available supply of homes. Because of the high demand, homebuilders are unable to keep up with supply, and a housing bubble can’t burst if there aren’t enough homes for sale.
Source: Zillow
Arizona Housing Market Forecast 2022 & 2023
The most important thing to take away from the shortage of housing units is that economists anticipate that the price of homes will continue to rise within the AZ housing market throughout the years 2022 and 2023. On the supply side, it favors the property sellers. The bottom line here is that a stark imbalance between supply and demand continues to put upward pressure on AZ home prices. This partly accounts for the somewhat bold Arizona real estate market forecast for coming years.
The other factors are that the economy of Arizona is robust, but the state is struggling with elevated levels of inflation and housing price growth. In 17 different states, the unemployment rate is at an all-time low. Arizona has 3.3 percent unemployment. The pace of population increase in Arizona is the fourth fastest in the country. A significant number of states saw a loss in population as a consequence of COVID-19, low birth rates, and migration to neighboring states.
Florida, Texas, and Arizona are the three states with the most rapid population increases. Years of underbuilding are a key contributor to the low inventory. According to a study conducted by the Weldon Cooper Center for Public Service at the University of Virginia, Arizona’s population is projected to expand by 26.1% between 2020 and 2040 – an increase of 1,897,585 people. As the population is expected to rise yet there are only a few available homes on the market.
This also raises a bit of a concern that in Arizona wages are not keeping up with the rising costs of housing. When prices go up, some buyers can no longer afford to buy and drop out. The faster that pricing goes up, the more buyers tend to drop out, at least in a healthy market.
Mortgage rates also play an impact here. In the past few years, interest rates have remained at historically low levels. This is one of the causes that contributed to a countrywide increase in home-buying activity. However, rates have increased somewhat during the previous several months in 2022. If rates continue to rise, the Arizona real estate market might experience a general cooling trend.
However, the persistent supply deficit is projected to “outweigh” this effect, guaranteeing that the AZ housing market will stay competitive long into 2023. Of course, there is also a great deal of uncertainty in the air. From escalating inflation to the conflict in Ukraine, there are a number of elements that might affect the economy in the future. Consequently, it is difficult to make reliable projections for the Arizona real estate market or any other market in the United States.
Here’s the median price of a home in some of the counties of Arizona (source: Realtor.com)
Arizona Counties
Median Listing Price
$/SqFt
Maricopa County
$530K
$292
Pima County
$385K
$219
Yavapai County
$595K
$312
Pinal County
$427.5K
$225
Mohave County
$389.9K
$238
Coconino County
$699.9K
$384
Navajo County
$450K
$272
Gila County
$475K
$297
Yuma County
$299.9K
$192
Cochise County
$269K
$166
Arizona’s housing market has over 900,000 renter households, accounting for 36% of the total number of households. According to a report from the National Low Income Housing Coalition (NLIHC), the rental prices in Arizona have become out of reach for many residents. For too many low-income workers, wages have not kept pace with rising rents and home prices. Workers need to make $21.10 an hour to afford a 2-bedroom rental at a fair-market rate.
In Arizona, the Fair Market Rent (FMR) for a two-bedroom apartment is $1,097. To afford this level of rent and utilities — without paying more than 30% of income on housing — a household must earn $3,658 monthly or $43,892 annually. Assuming a 40-hour workweek, 52 weeks per year, this level of income translates into an hourly Housing Wage of $21.10.
The minimum wage in Arizona is $12.00/hr and the Average Renter Wage is $17.46. Cost-burdened is defined as spending more than 30% of one’s monthly income on housing and utilities. Neighborhoods in west and South Phoenix are the most cost-burdened. In some cases, more than 50% of households are paying 30% or more of their income on housing costs, while less than 29% of renting households are housing cost-burdened in the north.
Flagstaff MSA is the most expensive MSA where you need an hourly wage of $24.35 to afford a 2-bedroom rental. The second most expensive MSA is Phoenix-Mesa-Scottsdale, where you need an hourly wage of $22.56 to afford a 2-bedroom rental.
Source: The National Low Income Housing Coalition
Between 2010 and 2018, the City of Phoenix’s median income increased by only 10%, while, median rent increased by over 28%, and the median home price increased by over 57% during this time. In 2018, half of Phoenix renters were considered housing-cost burdened, 25% of homeowners were housing-cost burdened and altogether 36% of the entire population is housing-cost burdened. According to a report by Phoenix.gov, 65 % of households that fall within or below the moderate-income range would require some amount of subsidy to achieve housing that is considered affordable at their income level.
Sources:
https://www.zillow.com/az/home-values/
https://www.realtor.com/realestateandhomes-search/Arizona/overview
https://www.thecentersquare.com/arizona/how-arizona-s-population-will-change-in-the-next-20-years/article_86c80054-4e38-5825-b0d1-ede98be1c649.html
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