Our industry specialist has reviewed and approved the final article. Also, some of the data presented here have been integrated into the Phoenix real estate spreadsheet template.
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Expecting a decrease in Phoenix prices in 2025? Think again.
Even with changes in the market, Phoenix is seeing high demand and not enough supply, which keeps prices on the rise.
Let's explore the reasons why prices in this city are set to climb in 2025.
This article gives you valuable insights, but remember, it’s not and will never be investment advice. We pull data from a range of sources to provide you with the most accurate picture possible, yet we can’t guarantee complete accuracy. Markets are difficult to predict. Make sure to do your own research and consult a professional before making any financial moves. Any risks or losses are your own responsibility.
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1) In Phoenix, there are only about 0.39 homes for each person, which is quite limited
Signal strength: strong
In Phoenix, the fact that there is around 0.39 home per inhabitant indicates a relatively low housing availability. This low ratio suggests that housing demand is outpacing supply, which often leads to increased competition for available homes.
One specific factor contributing to this is the steady influx of new residents attracted by Phoenix's growing job market and appealing climate. As more people move to the area, the pressure on the housing market intensifies, driving prices upward.
Additionally, locals know that Phoenix's urban sprawl limits the availability of land for new housing developments, further constraining supply. This combination of high demand and limited supply is a classic recipe for rising real estate prices.
If the ratio were to increase to 0.5 home per inhabitant, it might suggest a more balanced market, potentially stabilizing prices.
Source: USCensus
2) Three major websites confidently predict that home prices in Phoenix will rise in 2025
Signal strength: strong
There are three major websites forecasting a positive growth for home prices in Phoenix in 2025, which is a promising signal for potential investors.
Among these forecasts, Realtor is the most optimistic with a projected increase of 13.20% in home prices, followed by Redfin at 4% growth. Meanwhile, Zillow is more conservative, predicting a 0.10% change in home prices.
The significant gap between these forecasts suggests that there is some uncertainty in the market, and it's crucial to consider these predictions carefully. While these forecasts provide valuable insights, they should be taken with caution as they are not guarantees.
To make a well-informed decision, it is essential to rely on strong, reliable, and actual data alongside these forecasts. If all three forecasts were predicting a negative growth in home prices, it would signal a potential decline in the market.
Source: ZillowForecasts
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3) Phoenix's "vacancy rate" is just 6.5%, showing it's a bustling and competitive market
Signal strength: moderate
The vacancy rate in Phoenix is currently at 6.5%, which is considered very low and suggests a highly occupied market.
When vacancy rates are low, it often means that there is strong demand for housing, leading to increased competition among renters and buyers. This competition can drive up housing prices as more people vie for limited properties.
In such a market, properties that are easily rented are typically well-maintained single-family homes located in desirable areas like Arcadia or the Biltmore District. These areas are known for their proximity to amenities and good schools, making them attractive to families and professionals.
If the vacancy rate were to rise significantly, say to above 10%, it could indicate an oversupply of housing, potentially leading to a decrease in prices.
Source: NeighborhoodScout
4) Phoenix boasts a commendable livability score of 76
Signal strength: moderate
The livability score of 76 in Phoenix is considered good because it reflects a balance of amenities, climate, and community engagement that appeals to residents.
One key factor is the abundance of outdoor recreational activities available, such as hiking in the nearby mountains and enjoying the numerous parks, which enhances the quality of life. Additionally, Phoenix boasts a thriving arts and culture scene, with various museums, galleries, and theaters that attract both locals and tourists, contributing to a vibrant community atmosphere.
Moreover, the city has a strong job market, particularly in sectors like technology and healthcare, which draws professionals and families seeking stable employment opportunities. These characteristics make Phoenix an attractive place to live, thereby increasing demand for housing and potentially driving up prices in the future.
If the livability score were to drop below 60, it might indicate declining conditions that could deter potential residents and investors, possibly leading to stagnation or a decrease in housing prices.
Source: AreaVibes
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5) In Phoenix, home prices have risen by an average of 10.8% each year over the past decade
Signal strength: moderate
The fact that home prices in Phoenix have appreciated at an average rate of 10.8% over the last decade is a compelling signal for potential investors. This historical growth rate suggests that there has been consistent demand and price growth in the Phoenix housing market, which can create favorable conditions for future increases.
While a positive 10-year average home value appreciation indicates a history of demand and price growth, it's important to remember that past performance doesn't guarantee future results. However, this historical trend can still be a valuable indicator to consider when evaluating potential investments.
Investors should be aware that other factors, such as economic conditions and interest rates, can also influence future housing prices. It's crucial to consider a range of indicators and not rely solely on past appreciation rates.
If the average appreciation rate were to drop significantly, say to below 3% over a similar period, it might suggest a different trend and warrant a more cautious approach.
Source: NeighborhoodScout
6) Phoenix boasts a strong employment rate of 65.8%
Signal strength: minimal
The employment rate in Phoenix is at 65.8%, which is considered high compared to the national average in the United States.
This high employment rate suggests that more people have stable incomes, which can lead to increased demand for housing as people look to buy homes. The major employment sectors in Phoenix include healthcare, technology, and finance, which are known for providing well-paying jobs.
Companies like Intel and Banner Health employ a significant number of people in the area, contributing to the economic stability. With more people employed, there is a greater likelihood of people investing in real estate, driving up housing prices.
If the employment rate were to drop below 60%, it might indicate economic challenges, potentially leading to a decrease in housing demand.
Source: USCensus
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7) In Phoenix, about 18% of homes sell for more than their "listing price."
Signal strength: minimal
In Phoenix, around 18% of sales close at a price higher than the listing price, which is a significant indicator of demand.
When buyers are willing to pay more than the asking price, it suggests that competition among buyers is strong and they are eager to secure a property. This kind of market behavior often leads to an upward pressure on housing prices as sellers recognize the opportunity to increase their asking prices.
Moreover, this trend can be seen as a sign that buyers anticipate future price increases and are willing to invest more now to avoid higher costs later. As a potential investor, this could mean that investing in Phoenix real estate might yield good returns if the trend continues.
However, if the percentage of sales closing above the listing price were to drop significantly, say below 5%, it might indicate a cooling market where prices could stabilize or even decrease.
Source: Zillow
So, are home prices in Phoenix set to rise in 2025? Absolutely!
In Phoenix, the housing market is poised for a price increase in 2025 due to several compelling factors. The city currently has a low housing availability with only 0.39 homes per person, indicating a high demand that outpaces supply. This imbalance is further exacerbated by a steady influx of new residents attracted by Phoenix's robust job market and appealing climate.
Moreover, three major websites predict a rise in home prices, with Realtor forecasting a 13.20% increase. This optimism is supported by a low vacancy rate of 6.5%, which signifies a bustling and competitive market. Additionally, Phoenix's commendable livability score of 76 and a strong employment rate of 65.8% contribute to its attractiveness, driving demand for housing.
Historically, home prices in Phoenix have risen by an average of 10.8% annually over the past decade, reinforcing the trend of consistent demand. With 18% of homes selling above their listing price, it's clear that competition among buyers is fierce, further pushing prices upward. All these factors combined make it evident that Phoenix's real estate market is on an upward trajectory for 2025.