The BRU Report - February 2025 Arizona Housing market update
Arizona Housing Market Update – February 2025: A Buyer’s Market, But Not for Long
As we move into February 2025, Arizona’s housing market remains in a mild buyer’s market—something we’ve seen since November. But how long will it last? With population growth continuing, demand holding steady, and the state’s economy projected to grow by 2.8%, this window of opportunity for buyers may not be open much longer. The market is in the hands of interest rates which are projected to remain for the near future. But different cities are doing good, while some suffer, as you will see with the charts below.
The job market is showing strength, with unemployment falling to 4%, yet home sales remain low and slow. Supply is increasing, but with interest rates unlikely to drop anytime soon, affordability remains a challenge. However, more condos under $300K are hitting the market compared to last year, offering potential opportunities for first-time buyers. Insurance rates and hoa fees have gone out of control hurting the condo market.
For sellers, market conditions vary by location. The strongest seller’s markets right now? Chandler, Tempe, and Scottsdale. Meanwhile, buyers may find better deals in Surprise, Buckeye, and Maricopa, where homes are sitting on the market longer—averaging around 35 days. Strong buyers markets are typically on the outskirts of the greater phoenix area where home builders are offering low interest rates and incentive.
Looking ahead, Arizona’s long-term housing outlook remains positive. Inward migration, especially of higher-income retirees, continues to drive demand, and home prices are still trending upward. While short-term market fluctuations may impact some buyers and investors—especially house flippers struggling with high construction costs and financing—real estate in Arizona remains a solid long-term investment long term. If prices continue to be stable with upward pressure with these 7% interest rates, what will happen if they fall?
Phoenix Rental Market Overview
The Phoenix rental market is showing slight declines, with the average rent dropping 1.4% from last year to $1,422 per month. Here’s a breakdown of current rental prices:
- Studio apartments: $1,105 per month
- One-bedroom apartments: $1,322 per month
- Two-bedroom apartments: $1,565 per month
However, rental prices vary significantly by neighborhood:
- Downtown Phoenix: One-bedroom apartments average $2,100/month, reflecting the demand for urban living near employers, entertainment, and attractions.
- Arcadia: A two-bedroom apartment rents for about $2,500/month, driven by upscale homes and local businesses.
- Desert Ridge: One-bedroom apartments range from $2,000 to $2,200/month, thanks to the area’s family-friendly environment and amenities.
- Desert Ridge (studio apartments): Around $1,825/month, making it one of the pricier rental areas.
- Arcadia Lite: A more affordable option, with studio apartments averaging $1,366/month.
With rental rates fluctuating based on location, property type, and amenities, Phoenix remains a dynamic market for both renters and investors.
Considering buying a home? Explore homebuyer assistance programs Click Here—you never know what opportunities might be available!
Luxury homes ($1M+) saw the highest appreciation, while lower-priced homes (under $300K) experienced the biggest decline, indicating strong high-end demand and affordability challenges in the lower market.
The February 2025 Cromford Market Index shows a softening seller's market in metro Phoenix, with even top-ranking areas like Chandler experiencing price drops, while some outlying areas remain more unfavorable for sellers with strong buyer's markets.
Despite rising supply, the Cromford Market Index shows a slight dip in market health due to weakening demand, Sellers markets have a number of 100+
While Greater Phoenix median home prices for units under 2,000 sq ft have generally tracked above a 5% annual growth rate since 2001, recent trends suggest potential overvaluation as prices approach levels projected for Q1 2026.
Greater Phoenix median sales prices have fluctuated over the past three years, showing recent signs of growth after a period of decline, but remain below the June 2022 peak.
Chairman Powell indicates the Fed will maintain restrictive monetary policy if the economy remains robust and inflation persists above the 2% target, but will ease policy if the labor market weakens or inflation declines faster than expected.
Chairman Powell acknowledges the labor market is cooling and broadly in balance, currently not a significant driver of inflationary pressures.
Despite a resilient labor market with unemployment falling to 4% and wages rising, Fed Chair Powell highlights a "low-hiring environment" as job-switching declines and recession concerns persist.
Chairman Powell notes that after a period of weakness, the housing sector appears to have stabilized.
Despite the current spread between 30-year mortgages and 10-year Treasury yields being higher than the long-term average, indicating potential for mortgage rate decline, rates have recently plateaued suggesting other factors may be influencing the market.
The current spread between 30-year mortgage rates and 10-year Treasury yields is 2.39%, significantly above the long-term average of 1.7%, suggesting potential downward pressure on mortgage rates if the spread normalizes.
Builders anticipate high interest rates will remain their top challenge in 2025, while concerns about inflation and buyer hesitancy due to potential price declines are expected to lessen.
The three-month moving average sales price per square foot in Greater Phoenix has generally increased since 2017, with a steeper rise starting in 2020, reaching $313.07 as of February 12, 2025.
New listings in Greater Phoenix for 2025 are significantly outpacing the previous two years, indicating a potential surge in housing inventory.
Despite recent fluctuations, the Cromford Market Index indicates the Greater Phoenix housing market has largely remained in seller's market territory since 2020, with only brief dips into balanced territory.
January 2025 saw a significant surge in Greater Phoenix home sales over $1 million, with a 58.5% year-over-year increase, contrasting sharply with the predominantly declining or stagnant sales in that price range over the past decade.
The annual sales rate for Greater Phoenix homes saw a slight decrease of 1.1% in January 2025 compared to the previous year, with 67,367 sales versus 68,128 in January 2024.
Final Thoughts
Arizona’s housing market continues to shift, presenting opportunities for both buyers and sellers. While it remains a mild buyer’s market for now, population growth and steady demand suggest that won’t last forever. Whether you’re looking to buy, sell, or invest, staying informed about market trends is key to making smart real estate decisions.
If you’re thinking about buying, now could be the time to take advantage of current conditions—especially with more affordable options hitting the market. Curious about your next move? Let’s connect and find the right opportunity for you!
Jason Bru
📱 480-466-4917
✉️ jay@jaybrugroup.com
