Despite its propensity for very hot summers, Phoenix has attracted new residents for many years. From 2010 to 2020, it was the fastest-growing city in the United States. That pace has slowed, but from 2020 to 2023, it added another 195,000 people and is currently the fifth-largest city in the United States.
What contributes to Phoenix’s growth and what do the prospects look like for this area?
The New Revolution Driving The Phoenix Boom
Phoenix’s warm, dry climate and scenic mountain vistas have long made it a popular destination for retirees drawn to golf courses and resort living. But Phoenix’s growth story is about much more than sunshine and retirees. The greater Phoenix metropolitan area has relatively low unemployment. As of August 2024, the rate was 3.5%, which is below the national average.
The most interesting part of the story is what is coming next for Phoenix’s expansion: the transformation of the region into a hub for silicon chip manufacturing. Phoenix is the epicenter of a massive push to restore chip manufacturing in the United States – the CHIPS and Science Act, 2022 unlocked major funding for new chipmaking facilities. The movement has been nationwide, but much of the building activity has been centered in Arizona and Ohio.
A January 2024 report from Newmark Group found that the city is tops for manufacturing growth with over 15,000 jobs coming to the region. Companies like Intel and Taiwan Semiconductor are planning massive factories in the area. Although these factories have experienced delays, the excitement around the potential for this expansion has prompted increased homebuilding in the area.
Chipmakers are far from the only business in town. Top employers in the region include Banner Health and large universities like Arizona State University and Grand Canyon University. Petsmart also has its headquarters in Phoenix. Phoenix is also home to other types of manufacturing beyond chips: Kohler, Lucid Motors, Honeywell and others have facilities within the Greater Phoenix area.
Numbers To Pay Attention To For The Phoenix Real Estate Market
Much of the growth in the Phoenix market has been driven by new home sales. The Cromford Report, which tracks the Arizona real estate market, reported that for the first seven months of 2024, permits were up 39% in Maricopa County, which is home to Phoenix and surrounding areas. Some of that activity is located in the north Phoenix area near where Taiwan Semiconductor will open a large factory.
Inventory: Phoenix is one of the real estate markets where inventory has increased rapidly to over 20,000 homes for sale at the end of September 2024. When suddenly there are a lot of homes for sale in a particular area, it can be concerning, prompting fears of a real estate bubble.
But a single number taken from context doesn’t tell the whole story. John Wake, writer of the Arizona Real Estate Notebook, reviewed data from past years and found that inventory in the Phoenix area tends to spike around this time of year. Looking back over the past two decades, the current inventory level is fairly average. However, if this pattern continues, Phoenix could have more months of inventory than it has had in over a decade.
Prices: There is some good news regarding housing affordability in Phoenix. Prices seem to have stabilized. Redfin data shows that prices in the Phoenix area peaked in May 2022 at $470,000. The median sales price as of August was $450,000. Individual areas around Phoenix can vary greatly, but prices seem to stabilize overall. Sales have dropped over the past year, down nearly 13% as of August. However, there are signs of life. In an October 2024 Redfin report, Phoenix led the country with a 14.1% increase in pending sales.
However, Phoenix has been struggling with housing affordability. The city has set a goal to create or preserve 50,000 homes by 2030. As part of its Housing Phoenix Plan, the city is finding new opportunities for building housing, amending zoning laws to allow for more housing types, redeveloping city-owned land and forming private-public partnerships. The city also has programs to assist low-income families with home buying.
What Is The Outlook For The Phoenix Market?
Phoenix prices have likely peaked temporarily, which is good news for anyone preparing to buy a home in the area. Lower mortgage rates may incentivize increased buying and it is expected that home sales will rise in 2025. Check out our guide for current Arizona mortgage rates.
The area must balance the need for expansion and more housing supply with real concerns about access to water. The city says it has the water it needs; however, in 2023, Arizona Gov. Katie Hobbs announced some building restrictions for new development in the Phoenix area. Phoenix’s ongoing challenge will be to support expansion while maximizing sustainability.
Those interested in the Phoenix area will also want to monitor exurbs like Queens Creek, Casa Grande and Maricopa. One area to watch is Buckeye, a fast-growing city around 45 miles from Phoenix. A master-planned community called Teravalis being developed by the Howard Hughes Corporation, could eventually hold as many as 300,000 residents, turning Buckeye into one of the state’s largest cities.
While new investors and homebuyers in the area may have missed out on the run-up in prices over the last decade, the housing market seems relatively stable going forward. Migration to the area is likely to continue especially as the new chipmaking factories come online. The economic prospects for Phoenix should support growth in the housing market for years to come.