Phoenix’s Housing Market is historically volatile (the Wild West of US Real Estate). It tends to have periods of BOOMS and then big BUSTS. 2001-06 was a real estate boom. 2007-12 was a bust. And now we’re in another BOOM once again. Home values are up 50% over the last two years while homes for sale are down by over 50%.
Much of Phoenix’s recent appreciation is being driven by strong economic and demographic growth. Lots of companies and jobs are moving to Phoenix, and Arizona in general. Moreover, data from Redfin shows that many wealthy residents from Los Angeles, San Francisco, and Seattle are looking to buy a home in Phoenix.
But the Phoenix Real Estate Market also has a dirty little secret. And that’s investor demand. Redfin and CoreLogic estimate that between 30-40% of homes in Phoenix are purchased by an investor. That’s one of the highest across the 2022 US Housing Market and suggests that there could be significant downside in prices if these investors stop buying houses in 2022, or even worse, start selling.
This investor exposure is highest in cities like Glendale, Tolleson, Avondale, and Laveen, where investors are buying 40% or more of the homes on the market. Some of these areas also have a high poverty rate and low incomes, increasingly the likelihood of prices crashes in the next housing downturn.
Neighborhoods in Phoenix that could be more secure from a crash include higher income destinations like Scottsdale, Gilbert, and Chandler. These local markets have lower poverty rates and potentially lower risk of serious home value declines. However, prices could still go down.
Overall, I believe home values in Phoenix will go down by 25% over the next 3-4 years, which is about half the decline experienced in the 2008 Crash. I think the biggest declines will be in Glendale and Southwest Phoenix, while the Scottsdale Real Estate Market and the Gilbert/Chandler Markets won’t be impacted as much.
Of course – this is just my opinion on the market based on my read of the data. Others are more bullish on the Phoenix Housing Market and believe it will continue appreciating over the next several years.
Dallas Housing Deep Dive: https://youtu.be/M40GsEyuSkU
Redfin Investor Data: https://www.redfin.com/news/data-center/new-construction/
Zillow Home Value Data: https://www.zillow.com/research/data/
Realtor.com Inventory Data: https://www.realtor.com/research/data/
BLS Wages / Jobs Data: https://www.bls.gov/sae/data/
US Census Permits Data: https://www.census.gov/construction/bps/
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