Arizona Housing Market: What's Happening In 2023? (2024)

The Arizona housing market was on fire during the pandemic, particularly in Phoenix. The state’s capital saw median home prices soar for two years until they peaked at $475,000 in May 2022—a 61% increase from two years earlier.

“It’s slowed down quite a bit,” said Holly Gray, a Phoenix-area Realtor with Berkshire Hathaway HomeServices.

While some are worried that a housing crash could be coming, other data indicates median Arizona home prices are still on the rise.

Recent Home Prices in Arizona

The median sales price in Arizona was $350,390 for all housing types in May 2023—down 3.2% from a year ago, according to the Arizona Association of Realtors.

Real estate brokerage firm Redfin reports that the median sales price for all home types in Arizona was $436,100 in May 2023, a 6.2% decline from the previous year. Despite the difference in reports, both show a trend of Arizona home prices stabilizing.

Actual list prices vary depending on the region of the state. As of May 2023, the National Association of Realtors noted the following median list prices and the year-over-year change in these Arizona counties:

The list price isn’t necessarily the same as the sales price, and Redfin reports the state had a 98.3% sale-to-list price ratio in May 2023. This means sellers were getting close to their initial asking price at the closing table.
However, the number of homes selling above list price—18.9%— saw a dramatic 33.4% decline compared to May 2022.

Arizona Real Estate Trends

Home sales fell about 12% and available listings on the market declined 5.5% in May 2023 from a year ago, according to Arizona Realtors. Still, there are still bright spots in the state’s housing market.

In its Emerging Trends in Real Estate 2023 report, PwC listed Phoenix as among one of the year’s top 10 real estate markets. The consulting firm notes that the state’s economy is primed to attract a variety of large businesses.

That’s something Gray—who specializes in corporate relocations—also sees. She notes that TSMC—Taiwan Semiconductor Manufacturing Co.—is investing $40 billion in Arizona with the construction of a new chip manufacturing facility in metro Phoenix. The move will create thousands of jobs and bring new residents to the city.

In other statewide investments, over $500 million dollars has been accumulated from the Infrastructure Investment and Jobs Act for the construction of two land ports in Douglas and San Luis, making room for more people and goods. The construction effort is scheduled to finish in 2028.

Overall, job growth in Arizona has steadily increased since the beginning of the year. Between employment growth and a strong school system, Gray sees northeast Phoenix as a “hot spot” in the region.

Arizona’s housing market reflects this growth. According to Zillow, the median days to pending—which indicates how long a home is for sale on the site—was only 24 days as of May 2023, indicating an increase in purchase frequency.

Will Arizona’s Housing Market Crash?

Some are pessimistic about the future of the Arizona housing market, especially in Phoenix.

At the end of 2022, the National Association of Realtors predicted a 15.8% drop in combined sales and prices for the Phoenix-Mesa-Scottsdale market in 2023. Tucson was expected to fare only slightly better with a 10.2% decline.

Despite the decline in sales and available listings, home prices are on the rise. This price increase is common amongst states with lowing housing inventories. However, potential homebuyers in Arizona and elsewhere may be waiting for prices to come down and to see where mortgage rates, which have jumped considerably in the past year, go next.

Meanwhile, investment firm Goldman Sachs reportedly prepared a memo that said four U.S. housing markets were heading toward a crash that would rival that of 2008. Phoenix was on the list, and the company projected home prices could fall more than 25%.

Not everyone sees disaster in the future, though.

“Prices might go down,” Gray says, “[but] I don’t think the market is going to fall apart.”

Buying a House in Arizona

Even if Arizona home prices drop, that may be of little comfort to buyers.

“Affordability has gone way down with interest rates going up,” Gray says.

Still, as the market cools, homebuyers may have more leverage in negotiations with sellers. Real estate website Zillow reports that nearly 60% of homes sold below list price in April 2023.

Buyers may be better positioned to request concessions in an offer, but Gray says people need to be realistic. “You have some more power than you had before, but you don’t have ultimate power,” she says.

According to Rocket Homes, housing inventory has declined in recent months. For example, In June 2023, 5,044 homes were available for sale in Phoenix, which is down 7% from May. Despite this decline, housing demand continues to increase.

Selling a House in Arizona

Although many homes are selling below list price, that may be partially because Arizona sellers have set their expectations too high.

“A lot of sellers are still looking at last year’s prices,” Gray says.

Sellers in Arizona and across the nation face the same dilemma as buyers: high mortgage rates. Even if sellers net a strong sales price on their current home, buying their next property may be more costly than ever.

Potential sellers face interest rates north of 6.7% as of early June, according to Freddie Mac. And if they got their mortgage or refinanced when rates hit historic lows near 2.7% during the post-pandemic housing boom, getting a new home loan at today’s rates may not be as palatable.

This reality is prompting many would-be sellers to sit on the sidelines in watch-and-wait mode, stifling housing inventory.

While prices seem poised to decline, the state’s market is still geared toward the seller. As of May 2023, housing inventory represented 3.36 months’ supply of homes. That’s up more than 35% from last year but still well below the six-month inventory level Arizona Realtors cite for a balanced market.

Tips for Getting a Mortgage in Arizona

The best interest rates are available to those with strong credit profiles who manage their monthly debts well. Here are some steps Arizona homebuyers should take to improve their creditworthiness before applying for a mortgage:

• Check credit reports for errors and dispute any you find.
• Pay down outstanding debt and make all payments on time.
• Avoid making major purchases or closing any credit card accounts.

Homebuyers with annual incomes below $126,351 may also be eligible for the Home Plus Program, offered through the Arizona Industrial Development Authority. The program, which is available to income-eligible borrowers with credit scores of at least 680 for its conventional loans, provides down payment assistance and an affordable 30-year, fixed-rate mortgage.