Phoenix Housing Market: Prices, Trends & Forecasts 2022

The Phoenix housing 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 the last two years, several positive indicators look likely to act as a tailwind throughout 2022. 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 lingering impact of the 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 housing market leading a national recovery.

Phoenix Real Estate Market 2022 Overview

  • Median Home Value: $404,005

  • Median List Price: $488,000

  • 1-Year Appreciation Rate: +29.5%

  • Forecasted 1-Year Appreciation Rate: +25.2%

  • Weeks Of Supply: 5.1 (-0.8 year over year)

  • New Listings: 2,009 (-7.4% year over year)

  • Active Listings: 9,944 (-15.4% year over year)

  • Homes Sold: 67,640 (-3.3% year over year)

  • Median Days On Market: 24.7 (-9.0 year over year)

  • Median Rent: $1,729 (+25.0% year over year)

  • Price-To-Rent Ratio: 19.47

  • Unemployment Rate: 2.4% (latest estimate by the Bureau Of Labor Statistics)

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

  • Median Household Income: $57,459 (latest estimate by the U.S. Census Bureau)


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Phoenix housing market trends

Phoenix Housing Market Forecast 2022

The Phoenix housing market looks a lot like its national counterparts. In particular, a distinct lack of housing and increasing demand have led to historic appreciation. However, the real estate market is constantly in flux. While it is too early to tell exactly where the Phoenix housing market will be in the distant future, it is possible to forecast what is likely to happen over the next year. With that in mind, here is a Phoenix housing market forecast that is most likely to play out:

  • Home Values Will Increase: The median home value in the Phoenix housing market is $404,005, representing an increase of 29.5% over the last 12 months. The increase is largely the result of supply and demand constraints. Moving forward, the same seller’s market is expected to continue. Too many buyers will be competing over too few homes in 2022, causing the median home value to increase, perhaps as much as 25.2%.

  • Rents Will Increase: Rent prices in the Phoenix housing market have jumped 25.0% in as little as one year, only slightly trailing the historic pace of home value appreciation. That said, the increase in home prices has created more renters than usual. As a result, it is safe to assume rents will increase over the next 12 months.

  • Interest Rates Will Increase: In order to combat inflation, the Federal Reserve will increase interest rates; it’s not a question of if, but rather when. The only real question is how high rats will go. Some forecasts are calling for more than five increases, but even if there are fewer higher rates will impact home prices.

  • Rental Properties Will Be More Popular: Higher acquisition costs, lower profit margins, and a lack of availability are turning more Phoenix real estate investors to the rental market. Long-term rental properties look to be the better play in today’s market where monthly rents can help offset higher prices. Additionally, the lack of inventory in the housing market will drive more tenants to rental units, effectively reducing the risk of vacancies.

Phoenix Foreclosures In 2022

According to ATTOM Data Solutions’ February 2022 U.S. Foreclosure Market Report, a total of 25,833 U.S. properties received a foreclosure filing (default notices, scheduled auctions or bank repossessions) over the course of February. The same report acknowledges that foreclosures are up 1.0% from the previous month and 129.0% year over year.

“February foreclosure activity looks a lot like what we can expect to see for at least the next six months – double digit month-over-month growth, and triple digit year-over-year increases,” said Rick Sharga, executive vice president at RealtyTrac, an ATTOM company. “This isn’t an indication of economic turmoil, or of weakness in the housing market; it’s simply the gradual return to normal levels of foreclosure activity after two years of artificially low numbers due to government and industry efforts to protect financially impacted homeowners from defaulting.”

Foreclosures are up on a national level, and the Phoenix housing market isn’t an exception. However, it is worth noting that the latest increase isn’t an indictment on the health of the local real estate industry. Instead, the increase in foreclosures looks like a correction accounting for nearly two years of foreclosure moratoriums. With aid set to expire, it was only a matter of time until delinquencies increased.

It is too soon to tell how many foreclosures there will be in Phoenix over the course of 2022, but it is safe to say delinquencies will rise. Investors should heed the Phoenix housing market forecast and prepare for what is in store, lining up financing for future acquisitions. Those with financing in place could simultaneously help distressed homeowners avoid foreclosure and secure a deal of their own.

Phoenix Median Home Prices 2022

The median home value in the Phoenix real estate market has reached $404,005. At its current valuation, the median home value in Phoenix is higher than the $331,533 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 to an improving national economy, positive sentiment, and (ironically) a distinct lack of available inventory, real estate has appreciated more than 203.0%, a feat few cities can even come close to matching. Over the same period of time, the national average increased about 103.4%.

In the last two years, Phoenix has been one of the country’s fastest appreciating markets. Since the beginning of the pandemic, the median home value has increased more than 54.0%. The latest increases are due to a distinct lack of availability and increasing demand.

Of particular importance is how the Phoenix housing market is expected to fare moving forward. The pandemic has a lot of people asking the same question: Is Phoenix, AZ a good place to invest in real estate? The simplest answer is yes; the Phoenix housing market offers plenty of opportunities for investors. Still, the new market environment created by the pandemic has shifted the way investors view their exit strategies.

Should You Invest In The Phoenix Real Estate Market?

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 leaves new openings to capitalize on.

The Phoenix real estate market developed a reputation for catering to rehabbers over the last decade. Investors 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. Real estate prices have tested new highs each month in 2022.

On its way to today’s appreciation rates, the Phoenix housing market spent all of last year leading the national market higher. In fact, Phoenix saw some of the nation’s biggest increases in home prices from 2020 to 2021. According to ATTOM Data Solutions’ Year-End 2021 U.S. Home Sales Report “those with the biggest year-over-year increases in median home prices were Worcester, MA (up 39.6 percent); Barnstable, MA (up 39.2 percent); Boston, MA (up 28.8 percent); Boise, ID (up 27.2 percent) and Phoenix, AZ (up 26 percent).”

Prices have risen so much over the last two years 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 February, the average rate on a 30-year fixed-rate loan was 3.76%, according to Freddie Mac. At their current rate, mortgage rates will save today’s buyers thousands of dollars, and real estate investors will be able to increase monthly cash flow from operations. Perhaps even more importantly, rental property owners will be building equity in a physical asset with someone else’s money. That said, raises have risen, and they are expected to keep rising. The Federal Reserve just increased rates for the first time in three years, and the impact will hit housing prices. Still, even as prices rise, rates are still historically low.

At 19.47, 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 in the Phoenix housing market. 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.

In addition to an attractive rental market, investors in the Phoenix housing market will appreciate everything else the city has going for it:

  • Affordable Real Estate

  • High Appreciation Rate

  • Growing Rental Market

  • Arizona Has Lower Taxes

Affordable Real Estate

Affordability is relative, which plays to the Phoenix housing market’s favor. If for nothing else, the median home value in Phoenix is actually 21.8% higher than the national average. However, real estate in Phoenix looks affordable to many of the people moving from California and Nevada, which has turned into a lot over the course of the pandemic. Therefore, while Phoenix may look expensive relative to Arizona and the national average, it looks affordable to those migrating from western states.

High Appreciation Rate

Few real estate markets have appreciated at a faster rate than Phoenix, and there’s no reason to believe the trend won’t continue. With a mere 5.1 weeks of available inventory and plenty of demand, appreciation is the result of mounting competition; so much so, in fact, that home values have increased as much as 29.5% over the last year. In that time, Phoenix was one of the fastest appreciating cities in the country. Subsequently, the fundamentals haven’t changed much. Phoenix is still lacking inventory, and more people are looking to buy with interest rates on the rise. The convergence of these indicators suggests prices will continue to rise for the foreseeable future.

Growing Rental Market

The rapid rate of appreciation in the buyer’s market has inversely impacted the rental market. As values increase, more and more buyers are priced out of the market. In fact, even those who can afford to buy have been relegated to the renter pool because of a lack of inventory. Either way, more buyers haven’t been able to buy, which means demand for rentals has increased. The growing rental market is a direct result of the supply and demand constraints, and there’s nothing to suggest the demand for rentals won’t keep growing.

Arizona Has Lower Taxes

As perhaps one of the most attractive reasons for moving to Phoenix, the entire state of Arizona has attractive tax incentives; that is to say that the state has relatively low rates. When compared to California, where many people are migrating from, Arizona’s taxes look much more reasonable. The lower tax rate has served as an incentive for more people to move to places like Phoenix, and should continue to be a catalyst for positive net migration. In particular, seniors moving to Arizona will enjoy a lot of benefits. The state’s tax code does not tax social security income. Additionally, there is also no gift tax, estate tax, or inheritance tax.

Where To Invest In The Phoenix Housing Market

Not unlike every other city in the country, the Phoenix housing market may be broken down into several neighborhoods. Consequently, some neighborhoods offer the Phoenix real estate investing community more opportunities than others. As a result, those looking to break into the Phoenix real estate market should consider investing in the following neighborhoods:

  • Vistancia

  • Laveen

  • Deer Valley

Vistancia

Located on the Northwest outskirts of Phoenix, Vistancia has miles of open space, which is one of the primary reasons it has garnered so much attention. As the pandemic served as a catalyst for more work-from-home trends and an exodus away from metropolitan areas, Vistancia allowed Phoenix residents to live near a major city without sacrificing open spaces. As a result, the local neighborhood has thrived, and so too may investors. Here’s a look at the underlying indicators investors will come across:

  • Median Sales Price: $605,000 (+25.0% year over year)

  • Number Of Homes Sold: 137 (-18.0% year over year)

  • Median Days On Market: 30 (-6 year over year)

  • Sale-To-List Price: 100.2% (+0.5% year over year)

  • Homes Sold Above List Price: 44.5% (+18.6% year over year)

Laveen

Laveen is only eight miles from downtown but is still bordered by wide open spaces. This particular neighborhood gives residents the ability to enjoy a hybrid mix of suburban and metropolitan lifestyles. At the same time, Laveen has attracted buyers who have grown to enjoy larger living arrangements and spaces over the course of the pandemic. Here’s a quick look at the underlying numbers investors may want to look at:

  • Median Sales Price: $435,000 (+36.9% year over year)

  • Number Of Homes Sold: 333 (+34.3% year over year)

  • Median Days On Market: 31 (+3 year over year)

  • Sale-To-List Price: 100.6% (+0.1% year over year)

  • Homes Sold Above List Price: 49.1% (+2.7% year over year)

Deer Valley

In continuing the trend of wide-open spaces, Deer Valley is just a short distance from downtown, but also home to expansive, wide open areas. In particular, Deer Valley is developing a reputation for hiking and mountain biking. Speaking of developing, this neighborhood is an up-and-coming area with plenty to see and do. Deer Valley’s rise to prominence has resulted in the following fundamentals;

  • Median Sales Price: $416,150 (+28.0% year over year)

  • Number Of Homes Sold: 674 (-1.0% year over year)

  • Median Days On Market: 27 (-4 year over year)

  • Sale-To-List Price: 101.1% (+1.1% year over year)

  • Homes Sold Above List Price: 51.0% (+10.8% year over year)

Summary

The Phoenix housing 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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Sources

https://www.zillow.com/phoenix-az/home-values/
https://www.zillow.com/home-values/
https://www.zillow.com/research/data/
https://www.redfin.com/news/data-center/
https://www.freddiemac.com/pmms/pmms30
https://www.bls.gov/eag/eag.az_phoenix_msa.htm
https://www.census.gov/quickfacts/fact/table/phoenixcityarizona/PST045219
https://www.redfin.com/neighborhood/100403/AZ/Peoria/Vistancia/housing-market
https://www.redfin.com/neighborhood/102104/AZ/Phoenix/Laveen/housing-market
https://www.redfin.com/neighborhood/98264/AZ/Phoenix/Deer-Valley/housing-market
https://www.apartmentlist.com/research/category/data-rent-estimates
https://www.attomdata.com/news/market-trends/foreclosures/attom-february-2022-u-s-foreclosure-market-report/
https://www.attomdata.com/news/market-trends/home-sales-prices/attom-year-end-2021-u-s-home-sales-report/

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