What to Expect in 2024?

The Phoenix housing market has seen robust growth and strong home price appreciation in recent years. As the capital and largest city in Arizona, Phoenix offers an attractive year-round climate, steady population and job expansion, and relatively affordable home prices that continue to draw new residents.

Considering the recent rise in average sales prices, a decreased inventory, and the overall positive trajectory, the Phoenix MSA appears to lean towards a seller’s market, emphasizing the competitive landscape for potential buyers.

Home prices in Phoenix are experiencing an upward trend, as evidenced by the substantial increases in average and median sales prices year-over-year. This trend aligns with the overall growth and stability observed in various aspects of the housing market.

How is the Phoenix housing market doing currently?

Phoenix stands as a somewhat competitive housing market. The average time a home spends on the market is 41 days, emphasizing the brisk pace of real estate transactions. Additionally, some homes receive multiple offers, contributing to the competitive landscape.

In December 2023, the median sale price for homes in Phoenix surged by 8.5%, reaching an impressive $445K. According to Redfin, Phoenix’s housing market has experienced significant growth, with home prices witnessing an 8.5% increase compared to the previous year.

The median sale price of $445K showcases the robust demand and economic vitality of the region. Homes are selling faster, averaging 45 days on the market, a notable improvement from the 60 days reported last year.

When compared with nearby cities, Phoenix maintains its competitiveness, outperforming others in terms of days on the market and sale-to-list price ratios. Understanding the competitive dynamics of the local market is crucial for both buyers and sellers seeking optimal outcomes in their real estate endeavors.

The allure of Phoenix extends beyond its housing market, with 2% of homebuyers nationwide searching to move into the city. Los Angeles leads the pack in out-of-state interest, followed by Seattle and San Francisco. Meanwhile, a majority of Phoenix homebuyers express a desire to stay within the metropolitan area, with Prescott Valley emerging as a popular destination.

Examining the migration data reveals key inbound and outbound metros. Los Angeles, Seattle, and San Francisco top the list for inbound migration, showcasing Phoenix’s appeal. On the outbound side, Prescott Valley, Show Low, and Flagstaff are the destinations drawing residents away from Phoenix.

ALSO READ: Arizona housing market forecast

Phoenix MSA Housing Market Report

Sales in the Phoenix Metropolitan Statistical Area (MSA) have experienced a noteworthy increase of +6.8% month-over-month, showcasing a vibrant real estate market. However, when compared to the previous year, there is a slight dip of -3.3%, emphasizing the need for a closer look at the factors influencing this fluctuation.

Let’s delve into the data from the Arizona Regional Multiple Listing Service to understand the recent developments.

Inventory Dynamics

Total inventory has seen a month-over-month decline of -4.9%, signaling potential challenges for homebuyers in finding suitable properties. The year-over-year perspective reveals a more substantial decrease of -10.2%, indicating a tightening housing market in the Phoenix MSA.

Months Supply of Inventory

The months supply of inventory for November was 3.97, and December saw a further reduction to 3.54, suggesting a limited supply of homes available in the market. This low inventory can impact buyer choices and influence property prices in the coming months.

Price Trends in the Phoenix Housing Market

The average sales price has witnessed a significant increase of +8.7% year-over-year, indicating a robust demand for homes in the Phoenix MSA. Concurrently, the year-over-year median sales price has also seen positive growth, with an uptick of +4.4%, reflecting the overall strength of the housing market.

Forecasts for January predict a further increase in average sales prices, underlining the sustained demand in the market. However, a slight decrease is anticipated in median sale prices, suggesting a nuanced trend that potential homebuyers should consider.

Days on Market

Days on market decreased by -9 days year-over-year, showcasing the efficiency of the Phoenix MSA housing market. However, month-over-month data reveals a slight increase of +4 days, suggesting a potential shift in buyer behavior or market dynamics that deserves attention.

Phoenix Housing Market Forecast: What to Expect in 2024?

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:

According to Zillow, as of December 31, 2023, the average home value in the Phoenix-Mesa-Scottsdale area stands at $444,802, reflecting a 1.0% decrease over the past year. Homes in this region typically go pending in approximately 31 days, indicating a dynamic and relatively fast-paced market.

Key Metrics as of December 31, 2023

• For Sale Inventory: 16,842
• New Listings: 4,820
• Median List Price: $506,630

These figures provide a snapshot of the current supply and demand dynamics in the Phoenix housing market, offering valuable insights for those navigating the real estate landscape.

Recent Sales Trends

Examining data from November 30, 2023, sheds light on the recent sales performance in the Phoenix area:

• Median Sale to List Ratio: 0.992
• Median Sale Price: $435,333
• Percent of Sales Over List Price: 20.7%
• Percent of Sales Under List Price: 54.7%

These statistics offer a nuanced understanding of market dynamics, indicating the competitiveness and negotiation trends in recent transactions.

Market Outlook and Predictions

With the provided data, the question arises: Will This Housing Market Crash? While it’s essential to approach such forecasts with caution, the current indicators suggest a resilient market despite the slight dip in home values.

For those contemplating buying a house, the key consideration is whether now is a good time. The market’s pace, coupled with the percentage of sales both over and under the list price, could influence this decision.

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 January 2024, the median rent for all bedroom counts and property types in Phoenix, AZ is $1,750. This is -9% lower than the national average. Rent prices for all bedroom counts and property types in Phoenix, AZ have decreased by 3% in the last month and have decreased by 8% in the 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 $1,307 last month. Scottsdale was the most expensive city with one bedrooms priced at $1,730 whereas Casa Grande & Bullhead City were tied for the most affordable city with one-bedrooms both 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%)

• Queen Creek had the fastest growing rent, up 6.7% since this time last year.
• Gilbert saw rent climb 3.2%, making it second.

The Fastest Growing Cities For Rents in Phoenix Metro Area (M/M%)

• Prescott had the largest monthly growth rate, up 5.9%.
• Tempe rent increased 4.5% last month, making it second.
• Glendale was third with rent climbing 2.4%.

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.

References:

• https://armls.com/
• https://www.zillow.com/Phoenix-az/home-values
• https://www.redfin.com/city/14240/AZ/Phoenix/housing-market
• https://www.realtor.com/realestateandhomes-search/Phoenix_AZ/overview