Note: Our market forecast includes Phoenix data and data from its surroundings, including Mesa, Scottsdale, and more.
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If you're investing in Arizona, Phoenix should be on your radar. The city itself boasts a population of over 1.6 million, making it the fifth-most populated place in the country. It also spans nearly 516 square miles and is more than double the size of Arizona's next-largest city, Tucson.
If that weren't enough of a market opportunity, just look at the metro as a whole. Altogether, the Phoenix metropolitan area -- which includes neighboring cities like Mesa, Scottsdale, Glendale, and Tempe -- encompasses a whopping 15,000 square miles. Throw in the city's many universities, Fortune 500 companies, and major foothold industries, such as healthcare, retail, and tech, and there's a lot to be said about the possibilities Phoenix presents.
Are you considering investing in Phoenix real estate? Here's what you need to know about the local housing market.
The state of the market
There's plenty of room for optimism in the Phoenix market. While the metro still faces some key challenges in the months ahead (rising construction costs and home prices, to name a few), many of the city's major economic indicators are improving.
Take a look at the three major trends we're seeing in the area right now:
- Building permits are showing promise.
- Prices are on a tear.
- Local financial health seems to be improving.
Building permits are showing promise
Phoenix, like much of the country, has a major housing supply problem. Fortunately, the market may see some relief soon, especially if recent permitting data has anything to do with it.
Both single-family and multi-unit permits have seen jumps in recent months, and both sit well above historical averages for the city. The only holdup might be construction costs, which have increased almost 7% in just the last year.
Prices are on a tear
It's no secret that home prices have been rising across the country. But in Phoenix, they're actually surpassing national numbers. The current median price clocks in at $345,000 ($15,000 higher than the country's median), and prices are up a whopping 17% over the year.
Rents are also on the rise, albeit at a slower clip. They've jumped 8.4% in the last year and currently sit at $1,587 per month. That's below the national average rent, but the gap is definitely tightening and has been for some time.
Local financial health seems to be improving
Overall, Phoenix residents seem to be in a good place. Foreclosure and mortgage delinquencies are trending downward (and they're lower than national averages), and consumer sentiment has been on the rise for a while. When you throw in low interest rates and a decreased home price-to-income ratio, you've got a pretty good foundation to build on.
Phoenix housing demand indicators
Charts courtesy of Housing Tides, an EnergyLogic company.
Phoenix's demand indicators are on the up and up. The unemployment rate is improving, consumer sentiment is trending upward, and the city's seen lots of household growth in recent years. The only depressant? That'd be rising rents and home prices, which have been on a runaway -- particularly since the start of the pandemic.
Phoenix did better than most cities when the pandemic hit. Its unemployment rate maxed out at just 12.5% -- well below the nation's 14.8% average -- and has steadily trended downward since. Currently, just 6.5% of Phoenix residents are unemployed. Altogether, the metro area has lost about 84,000 jobs in the last year.