Phoenix, AZ Real Estate Market Trends & Analysis [Updated 2021]

Jump To Another Year In The Phoenix Real Estate Market:


The Phoenix real estate market in Arizona has positioned itself very well to suit investors. In addition to the generous amount of momentum real estate in Phoenix has carried over from 2020, several positive indicators look likely to act as a tailwind over the course of 2021. Activity looks to remain strong, as high appreciation rates have not scared off buyers. Perhaps even more importantly, the local economy appears slightly more insulated from the current Coronavirus pandemic than many of its national counterparts. When unemployment numbers spiked due to the pandemic, the city’s unemployment rate remained well below the national average and has actually recovered faster than many expected. As a result, it is not hard to imagine the Phoenix real estate market leading a national recovery.

Phoenix Real Estate Market 2021 Overview

  • Median Home Value (Phoenix-Mesa-Scottsdale Metro): $328,359

  • 1-Year Appreciation Rate (Phoenix-Mesa-Scottsdale Metro): +15.3%

  • Median Home Value (1-Year Forecast): +10.4%

  • Median Rent Price (Phoenix-Mesa-Scottsdale Metro): $1,475

  • Price-To-Rent Ratio (Phoenix-Mesa-Scottsdale Metro): 18.55

  • Unemployment Rate (Phoenix-Mesa-Glendale): 7.2% (latest estimate by the Bureau Of Labor Statistics)

  • Population: 1,680,992 (latest estimate by the U.S. Census Bureau)

  • Median Household Income: $54,765 (latest estimate by the U.S. Census Bureau)

  • Percentage Of Vacant Homes: 13.07%

  • Foreclosure Rate: 1 in every 9,521 (1.0%)


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Phoenix real estate investing

Phoenix Real Estate Investing 2021

Arizona’s capital (and its surrounding metro area) has served local investors well for the better part of a decade, which begs the question: Is Phoenix a good real estate investment? The answer is simple: yes. Investors who know how to navigate today’s real estate landscape will find Phoenix has plenty of opportunities. If for nothing else, the current pandemic has disrupted daily routines and market indicators, which means new openings to capitalize on.

The Phoenix real estate market developed a reputation for catering to rehabbers over the course of the last recession. Rehabbers coveted real estate for various reasons, not the least of which included a disproportionately high foreclosure rate and attractive profit margins. The lower home values resulting from the Great Recession were too hard to pass on at the time, and investors cashed in.

However, it is worth noting that the local real estate market has come a long way since then. Coming off of nearly a decade’s worth of appreciation, home prices are much higher today, and the same attractive profit margins investors coveted in 2012 are harder to come by. In fact, real estate prices have reached record highs.

According to Attom Data Solutions’ Year-End 2020 U.S. Home Sales Report, few cities across the country saw price increases on Phoenix’s level. “The largest median-price increases in metro areas with a population of at least 1 million in 2020 came in Milwaukee, WI (up 15.3 percent); Memphis, TN (up 15.1 percent); Phoenix, AZ (up 14.9 percent); Birmingham, AL (up 13.7 percent) and Seattle, WA (up 12.9 percent),” according to the report.

Over the last decade, prices have risen so much that rehabbing has taken a back seat to what looks like the most attractive exit strategy: rental properties. To be clear, that’s not to say rehabbing isn’t a viable investment strategy anymore, but rather that the impact of the Coronavirus on real estate appears to favor passive income investors.

There are currently three things working on behalf of passive income investors in today’s marketplace, and they are all the result of what has happened in response to the Coronavirus:

  • Interest rates on traditional loans are historically low

  • Years of cash flow can easily justify today’s higher acquisition costs

  • The price-to-rent ratio suggests high home prices will increase rental demand

As of January, the average rate on a 30-year fixed-rate loan was 2.74%, according to Freddie Mac. The start of 2021 also represented one of the lowest average mortgage rates ever, and the Fed announced its intentions to keep rates low for the foreseeable future. As a result, lower borrowing costs have brought down acquisition costs for those looking to add to their passive income portfolio. At their current rate, mortgage rates will save today’s buyers thousands of dollars, and real estate investors will be able to pad their bottom line. Perhaps even more importantly, rental property owners will be building equity in a physical asset with someone else’s money. Each rental payment nets cash flow each month and pays down the principal on the mortgage.

At 18.55, the city’s price-to-rent ratio suggests it may be more affordable to rent than to own. In fact, demand for rental properties is currently very high, as they are not only more affordable, but the presence of the Coronavirus has drastically reduced inventory. Even those who wish to buy a home in today’s market will be forced to rent, which will certainly drive up demand for rental properties. That said, the median numbers we were looking at earlier started to lean in favor of the Phoenix real estate investing community. As demand increases, competition will allow rental property owners to increase prices.

Investors are lucky to have several viable exit strategies at their disposal. Still, none appear more attractive than building a proper rental property portfolio in the wake of a pandemic. Too many important market indicators are pointing towards becoming a buy-and-hold investor to ignore.

2021 Foreclosure Statistics In Phoenix

The Phoenix real estate market once represented the poster child of the foreclosure crisis, but a lot has changed since 2012. As home prices have increased, equity has returned to places many people thought it was gone forever. The increases in price has improved the local foreclosure rate, which now stands at a relatively healthy 1.0%. More specifically, one in every 9,521 homes is considered default, auction, or bank-owned. For context, the foreclosure rate in the United States is about 0.8%.

Investors looking to rehab deals should consider looking at Phoenix’s foreclosure inventory. If for nothing else, distressed homes may often be acquired at a discounted price. With that in mind, the local real estate investing community should really consider visiting local auctions. Making up 97.1% of the city’s distressed inventory, auction homes are far and away the most abundant source of foreclosures.

To narrow the search down even further, here’s a list of the neighborhoods with the highest distribution of foreclosures:

  • 85006: 1 in every 2,621 homes is currently distressed

  • 85019: 1 in every 2,784 homes is currently distressed

  • 85012: 1 in every 3,898 homes is currently distressed

  • 85035: 1 in every 3,913 homes is currently distressed

  • 85009: 1 in every 4,797 homes is currently distressed

The Coronavirus is expected to take a significant financial toll one homeowners, and perhaps even cause an influx in foreclosures in the coming months. While it is too soon to tell just how much foreclosures will increase, investors who line up financing and position themselves for success at this time could be in line for a busy year.

2021 Median Home Values In Phoenix Metro Area

The median home value in the Phoenix metro area has reached a healthy $328,359. At its current valuation, the median home value in Phoenix is higher than the $266,104 mark held by the national average. It is worth pointing out that today’s home values are the result of years of historical appreciation. The median home value in the Phoenix metro area, for example, dropped as low as $133,000 towards the end of 2011 (when the Great Recession was at its worst).

Since then, however, real estate in Phoenix has made up a lot of ground. Thanks, primarily, to an improving national economy, positive sentiment, and (ironically) a distinct lack of available inventory, real estate has appreciated by as much as 146.8%, a feat few cities can even come close to matching. Over the same period of time, the national average increased about 55.0%.

As recently as last year, Phoenix was one of the fastest appreciating housing markets in the country.

“Along with Milwaukee and New Orleans, other major metro areas with a population of at least 1 million and at least a 10 percent annual increase in home prices in the first quarter of 2020 were Virginia Beach, VA (up 13.0 percent); Phoenix, AZ (up 12.1 percent); Memphis, TN (up 11.5 percent); Columbus, OH (up 11.4 percent) and Charlotte, NC (up 10.7 percent),” according to the previously mentioned First-Quarter 2020 U.S. Home Sales Report issued by Attom Data Solutions.

Local neighborhoods have seen drastic increases in home values in a relatively short period of time. As perhaps the largest beneficiaries of Phoenix’s latest success, here’s a list of the city’s most expensive neighborhoods (according to NeighborhoodScout):

  • Skyline Heights / The Pointe

  • E Camelback Rd / N 44th St

  • N 44th St / E Mcdonald Dr

  • N Central Ave / W Northern Ave

  • N 56th St / E Lone Mountain Rd

  • E Camelback Rd / N 56th St

  • E Indian School Rd / N 50th Pl

  • Links Point / Orangetree Estates

  • E Camelback Rd / N 32nd Pl

  • Doubletree Canyon / Firebrand Ranch

Many neighborhoods appear to have fared well over the course of the pandemic, as indicated by the relative strength of the local market. Of particular importance, however, is how the Phoenix housing market is expected to fare moving forward. The pandemic has a lot of people asking the same question: Will the Phoenix housing market crash? The most likely answer is no, the Phoenix housing market isn’t expected to crash. There is simply too much demand for prices to decrease. In fact, forecast are calling for a 10.4% increase in the coming year.

The Impact Of COVID-19 On The Phoenix Real Estate Market

One-year into the pandemic, the impact of COVID-19 on the Phoenix housing market is becoming clear. For most of last year, fear and uncertainty brought down many of the city’s most important indicators. Nobody knew what to make of the new market in the wake of the Coronavirus. With 2020 officially behind us, it’s safe to assume we have a better idea of the impact COVID-19 will have on the Phoenix housing market.

The biggest impact we have seen is government intervention. In response to the pandemic, interest rates were dropped to spark buying activity. At the beginning of 2021, the average commitment rate on a 30-year fixed-rate mortgage from Freddie Mac sat well below 3.0%. Today’s rates are historically low and have already convinced many buyers to get off the fence. Homeowners and investors have shown up to take advantage of lower rates, and more are expected to do so with local unemployment improving.

Phoenix Real Estate Market: 2020 Summary

  • Median Home Value: $269,175

  • 1-Year Appreciation Rate: +8.0%

  • Median Home Value (1-Year Forecast): -0.3%

  • Median Rent Price: $1,475

  • Price-To-Rent Ratio: 15.20

  • Unemployment Rate: 8.3% (latest estimate by the Bureau Of Labor Statistics)

  • Population: 1,680,992 (latest estimate by the U.S. Census Bureau)

  • Median Household Income: $54,765 (latest estimate by the U.S. Census Bureau)

  • Percentage Of Vacant Homes: 13.07%

  • Foreclosure Rate: 1 in every 9,607 (1.0%)

Phoenix Real Estate Investing 2020

Phoenix housing market trends allowed the local investing community to enjoy a profitable 2020. In fact, few markets across the country could keep pace with trends occurring in Phoenix. Most notably, demand persisted in the face of rapid appreciation. The unique combination of rising prices and demand catalyzed activity.

It is important to note that the increase in activity also had a lot to do with tailwinds created by the pandemic. In particular, the Fed dropped interest rates to their lowest point ever in 2020. Low borrowing costs inspired buyers across the country to take action, and real estate in Phoenix became a beneficiary. Buyers couldn’t wait to take advantage of low borrowing costs, making it difficult for inventory to keep up. Competition increased, and home values continued to appreciate during one of the worst pandemics in recent history. Therein lies the true reason the Phoenix real estate investing community had a great 2020: demand persisted in the face of rising home values.

Market conditions in 2020 turned in favor of long-term investments instead of short-term exit strategies. Thanks to many of the indicators which emerged from the pandemic, rental properties became the preferred medium of investment.
Thanks to low borrowing costs, prospective landlords could simultaneously reduce mortgage obligations and increase monthly cash flow. These factors helped offset high acquisition costs and made building a rental property portfolio more attractive than ever. That’s not to say there weren’t rehabbing opportunities, but rather that indicators made rentals more appealing in 2020.

Phoenix Real Estate Market: 2016 Summary

  • Median Home Price: $223,100

  • 1-Year Appreciation Rate: 8.2%

  • 3-Year Appreciation Rate: 32.0%

  • Unemployment Rate: 4.5%

  • 1-Year Job Growth Rate: 3.6%

  • Population: 1,600,000

  • Median Household Income: $50,068

Phoenix Real Estate Investing 2016

For homebuyers and investors alike, there wasn’t much to dislike about the Phoenix real estate market in 2016. Home prices were outpacing the national average, while a slew of other factors—employment, home affordability, and new housing construction rates—drove the Phoenix housing market trajectory upwards. According to Phoenix real estate news, the median home price for the Valley of the Sun was above the national average. That said, the Phoenix real estate market was as enticing as ever for seasoned buyers, investors, and first-time homebuyers at the time.

The housing market thrived during the conditions of 2016, thanks to several critical indicators. Along with growing home prices and appreciation rates, the local housing market was enjoying an improved economy. The unemployment rate was 4.5%, a decline of 0.8% from the previous year, and 0.5% better than the national average. To top things off, the job growth rate was 3.6% during the first quarter.

Another component driving the Phoenix housing market in 2016 was home affordability. While historically strong, the ratio of income paid to monthly mortgage payments in the first quarter of 2016 was 11.6%, which was better than its historical average. Believe it or not, the housing market was more affordable than most markets in the nation at the time.

Phoenix Real Estate Market: 2014 Summary

  • Current Median Home Price: $198,600

  • 1-Year Appreciation Rate: 8.3%

  • 3-Year Appreciation Rate: 72.7%

  • Unemployment Rate: 6.5%

  • 1-Year Job Growth Rate: 2.1%

  • Population: 1.5 Million

  • Percent Of Underwater Homes: 22.2%

  • Median Income: $51,847

  • Active Listings: 24,904

Phoenix Real Estate Investing 2014

Among the cities most battered by the Great Recession, the Phoenix housing market was one of the first to snap back in 2011. Real estate investing, in particular, could attest to the rebound at the time, and the trend continued into 2014. The Arizona city had a median home price of $198,600, which was less than the national average of $212,267, but prices were rising. While homes in the region did not appreciate as fast as they were earlier this year, the outlook was encouraging at the time.

Since 2013, homes have appreciated nearly twice as fast as the rest of the country, 8.3% and 4.6%, respectively. Perhaps even more encouragingly, however, is the fact that homes in this region appreciated by as much as 72.7% in the previous three years, whereas the national average was 25.8% over the same period.

Phoenix Real Estate Market Summary

The Phoenix real estate market is perhaps one of the country’s hottest, despite all of the obstacles presented by the current pandemic. In fact, the disruption created in the wake of the Coronavirus looks like it currently represents a new opportunity for long-term investors. While rehabbing remains an attractive exit strategy in Phoenix, building a rental property portfolio looks to be more advantageous at the moment.

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