Arizona’s real estate market has entered the summer of 2024 with a unique mix of momentum and caution, shaped by macroeconomic shifts, evolving local conditions, and the enduring interest of investors from within and outside the state. Over the past week, a series of reports and market updates by outlets such as The Arizona Republic, AZCentral, and Phoenix Business Journal have provided a granular look at where the market currently stands and what this means for both retail buyers and real estate investors.
Housing Prices Remain Resilient
Despite higher mortgage rates, Arizona home prices have held their ground, especially in the state’s major metro areas. Median sale prices in the Phoenix metro area remain above $450,000, according to weekly updates from the Arizona Regional Multiple Listing Service (ARMLS) issued in early June. This reflects a slight increase over May’s numbers, and a notable recovery from a modest price dip that was observed in the fall of 2023.
The persistent resilience in prices can be attributed in part to strong in-migration patterns and steady demand from buyers relocating from more expensive West Coast markets. This continued influx of new residents, especially to Maricopa County and its surrounding suburbs, helps sustain price levels even as some buyers have been priced out of the market due to higher borrowing costs.
For investors, the continued strength in prices is a double-edged sword. Those holding properties have seen their equity remain steady or even rise modestly, especially in desirable submarkets such as Gilbert, Chandler, Scottsdale, and Peoria. However, the higher cost of entry and increased mortgage rates have made it more challenging for new investors to find bargains or positive cash flow in traditional buy-and-hold scenarios.
Inventory on the Rise, But Still Tight
One of the most notable shifts in the Arizona market this year has been the pace at which inventory is rising. Recent data over the past week indicates a growing number of active listings, especially for single-family homes in Maricopa and Pinal counties. As of the first week of June 2024, active listings in the Phoenix area are up about 25 percent compared to the same period last year. This marks the second consecutive month in which the number of homes for sale has climbed.
Despite this, inventory remains well below the levels considered a balanced market, which the Cromford Report suggests would be roughly four to six months’ supply. Currently, most Arizona metros are hovering between two and three months of supply. The increased inventory has begun to ease the fierce competition among buyers seen over the last couple of years, but homes that are priced correctly and move-in ready still generate significant interest.
For investors, particularly those interested in flipping properties or acquiring value-add single-family rentals, the uptick in inventory could translate to more opportunities. Deals are still not easy to come by, but fewer bidding wars may enable disciplined investors to negotiate more favorable terms and find properties with upside potential. For those investing in build-to-rent or new construction, the increased supply could result in longer absorption times but may create more options for purchase or partnership with local builders.
Home Sales Activity Slowing
The most recent weekly updates indicate that closed sales across the Phoenix area have slowed approximately six percent compared to last spring. This is consistent with national trends, where higher interest rates have cooled buyer enthusiasm and led to longer days on market. Homes in greater Phoenix are now spending a median of about 35 days on the market, up from fewer than 25 days during the same period last year.
While some of this slowdown is expected during the summer months, the magnitude this year appears to be more directly tied to the persistent challenge of affordability. Mortgage rates are hovering near seven percent, up from historic lows during the pandemic years. This has pushed monthly payments beyond reach for many first-time buyers, despite relatively stable prices. As a result, more buyers are opting to rent rather than purchase, fueling continued demand in the region’s rental market.
For real estate investors, slower sales velocity presents both risks and opportunities. Flippers and short-term investors need to account for longer holding times and potentially higher carrying costs. Those with rental portfolios may benefit from stronger demand for quality rentals, as the pool of would-be buyers shifts toward the leasing market instead. Investors in multifamily or single-family rental properties could find increasing yields, particularly if they offer units in growth corridors where new jobs and infrastructure are coming online.
Key Investment Considerations for Arizona
Given these shifts, what should investors be watching most closely in the Arizona market in the coming months?
Interest Rates and Affordability
Investors should closely monitor the direction of mortgage rates and the Federal Reserve’s policy outlook. Any meaningful drop in rates could quickly rekindle buying activity and put upward pressure on prices once again. On the flip side, persistent high rates may push more listings onto the market and keep sales volume muted, possibly leading to price softening in fringe or oversupplied areas.
Submarket Performance
While the Phoenix metro is often treated as a single market, local dynamics can vary widely by city and sometimes by neighborhood. Tempe and downtown Phoenix remain popular with renters, while the Northwest Valley and Southeast Valley continue to attract first-time buyers and families. Tucson remains somewhat more affordable, and Flagstaff and Prescott are seeing increased second-home and vacation property demand as remote work remains popular.
Rental Market Strength
The latest data show that rental rates in the Phoenix area have risen by roughly four percent in the past year, even as the pace of increases has moderated from the double-digit growth seen during the pandemic. With an ongoing influx of renters priced out of buying, well-located rental properties continue to provide stable cash flows and attractive capitalization rates, despite higher borrowing costs on new acquisitions.
New Construction and Build-to-Rent
Arizona continues to be a hotbed for build-to-rent developments, fueled by institutional investors and local syndicates alike. Recent headlines this past week detail several large projects moving forward in the West Valley, with hundreds of new single-family homes slated for lease in 2024 and beyond. Investors considering new construction should do thorough due diligence, as the increase in supply could impact lease-up times and rent growth in the near term.
Fix-and-Flip Strategies
Seasoned flippers are now operating in a more tempered environment. Rising inventory means there are more choices, but higher labor and material costs, along with slower resale timelines, require careful underwriting. Recent news highlights several successful flips in older neighborhoods near Phoenix’s urban core, but also notes increased caution around overpaying for unrenovated homes or underestimating renovation budgets.
Outlook
Arizona’s real estate market in June 2024 remains on solid footing, but investors must stay nimble. The interplay between inventory growth, home price resilience, and shifting buyer habits will define the balance between risk and reward. The current landscape offers durable opportunities, particularly for long-term rental investors and those equipped to add value amidst moderate supply growth. As economic headlines evolve and local market differences sharpen, investor success will depend on targeted strategies and careful attention to both emerging risks and new pockets of demand.
