Arizonas real estate landscape saw a dramatic transformation from 2018 to 2023.
Whether flocking to city condos or desert escapes, Arizonans redefined whatand wherehome means.
Arizonas Housing Market Rollercoaster
Between 2018 and 2023, Arizonas housing market turned into a rollercoaster.
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Demand for homes climbed rapidly, pushing prices nearly double what they were five years prior.
Part of the frenzy was fueled by historic low mortgage rates during 20202021.
Thirty-year mortgage rates dipped to around 3%, which supercharged buyers purchasing power.
However, this climate changed abruptly after 2021.
The classic detached home with a yard is still the goal for many families.
But as prices soared, more buyers had to adjust their expectations.
In metro Phoenix by 2022, finding any single-family house under $300,000 became extremely difficult.
This pushed budget-conscious buyers to consider alternative property types.
Condos and townhomes grew in popularity as a more affordable step into homeownership.
By 2022, condos were sometimes the only option under $250,000 in the hottest markets.
These attached homes come with HOA fees, but overall monthly costs often remained manageable for moderate-income households.
Meanwhile, newly built homes were in high demand too.
Builders in Phoenixs outskirts and in smaller cities sold many new houses to meet the influx of buyers.
Many younger families and professionals used the 20182021 boom as a chance to upsize.
On the other hand, some homeowners especially empty-nesters and retirees looked to downsize during these years.
Many baby boomers chose to sell and move to a smaller home or condo that was easier to maintain.
During the pandemic, health concerns also made some seniors stay put rather than tour new homes.
The Rise of Second Homes
A notable development in this period was the rise in second-home buying.
This blurred the line between primary and secondary residence for certain buyers during the pandemic.
This spurred many to rethink where and how they wanted to live.
The state offered more house for the money, good weather, and plenty of room to spread out.
In metro Phoenix, families seeking affordability flocked to the outskirts areas like the West Valley (e.g.
Buckeye, Goodyear) and southern Pinal County in search of reasonably priced homes.
These fringe communities boomed as people left the dense city for more space.
Tucsons suburbs saw a similar trend, though on a smaller scale.
Desire for Space
The pandemic also changed what buyers looked for in a home.
However, once vaccines rolled out and life gradually normalized, urban living began to regain appeal for some.
By 20222023, young professionals and downsizers started returning attention to condos and townhomes in city centers.
As noted earlier, the statewide median sale price roughly doubled in five years.
That kind of increase roughly an $200K+ jump put Phoenix among the fastest-growing markets in the nation.
Tucson, the second-largest city, also saw prices climb, though less dramatically.
Buyers often had to bid above asking prices or make cash offers to win a house.
Even appraisals struggled to keep up with the rapidly rising values.
The result was year after year of double-digit percentage price growth in 2020 and 2021.
The Interest Rate Swing
At the same time, mortgage rates swung wildly.
In 2018, rates were around 45%, which was historically normal.
But the Federal Reserves actions during the pandemic pushed rates down dramatically.
However, in 2022 the script flipped.
Inflation surged and the Fed began hiking rates, which drove mortgage rates up quickly.
In effect, the affordability boost of low rates was gone, just as home prices were peaking.
In Arizonas largest metro, Phoenix, the affordability situation became especially severe by the end of this period.
Tucson fared a bit better but also saw affordability drop.
However, local buyers in those areas often didnt feel rich.
Also, the inventory of homes for sale is thin in many rural towns.
There might only be a handful of houses on the market at any given time, which limits choice.
Places like Sedona, Prescott, or lakeside and mountain towns (e.g.
This drove up prices in communities that typically had been sleepy.
Local first-time buyers in those towns found themselves squeezed out by the rapid price jumps.
That made it harder for the local workforce (teachers, police, service workers, etc.)
to afford homes in their own city.
Whos Buying Homes?
A few key demographic trends emerged:
Age and Income Shifts
Buyers got older on average.
With housing costs so high, younger adults struggled to break into the market.
Arizona mirrored this trend.
Meanwhile, older buyers (Boomers and Gen X) took a larger share of purchases.
Boomers made 39% of home purchases in 2022, while Millennials fell to 28%.
The buyers who succeeded in this market tended to have higher incomes or significant assets.
National data shows about 60-70% of recent homebuyers are married pairs, and this held true in Arizona.
The share of first-time homebuyers dropped to record lows during this period.
Many young households effectively gave up on buying, at least temporarily.
Arizona saw a surge in investor activity during the housing boom.
This was one of the highest rates in the country.
Both urban and resort areas saw an uptick in purchases that were not intended as primary residences.
The pandemic period triggered a boom in second-home purchases nationwide, and Arizona was part of this trend.
Nationally, purchases of second homes were about 37% higher in 2020 and 2021 compared to pre-pandemic levels.
Some Arizona vacation markets experienced almost a feeding frenzy.
However, by 2023 this trend cooled off considerably.
Vacation home sales nationally had fallen by nearly three-quarters from their pandemic peak by late 2023.
How 20182023 Compares to 20082017
The 20082012 period was a time of housing market distress in Arizona.
The state had been ground zero for the mid-2000s housing bubble and subsequent crash.
Home prices peaked around 20062007 and then plummeted when the bubble burst.
From 2012 to 2017, the market gradually recovered.
Prices crept back up from their lows, but very slowly at first.
In contrast, 20182023 was a period of rapid expansion and exuberance (at least until late 2022).
The pandemic added an unexpected catalyst that the earlier decade did not have.
After 2008, buyers and banks were wary.
People were trying to rebuild credit, and many Millennials delayed buying because they graduated into a tough economy.
By the mid-2010s, confidence slowly returned.
In 20082017, some trends actually went in the opposite direction to recent ones.
During the housing bust, far-out suburbs and rural fringe areas suffered the most.
