However, home prices rose much faster than incomes during this period, straining affordability.
By 2023 the homeownership rate settled around the high-60s, still above early-decade levels.
Dramatic Price Growth
Home price growth far outpaced income growth.
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This appreciation dramatically outstripped household income gains (median household income rose only ~20% in that span).
As a result, the share of homes affordable on a median income plummeted.
Many were drawn from higher-cost states, bringing savings or equity that helped them compete in Arizonas market.
Remote work trends also allowed some households to move from expensive coastal cities to relatively affordable Arizona.
Arizona reflected this pattern as buyers seeking value flocked to suburban communities on the outskirts of Phoenix and Tucson.
By Q2 2022, over 31% of Phoenix home sales were to investors nearly one in three purchases.
But they often found themselves bidding against investors for starter homes.
Overall, however, the frenzy of 20202021 benefited established investors the most.
Phoenixs economy and population grew rapidly from 20182023, fueling housing demand.
This sharp rise priced many middle-income families out of central areas.
Phoenix also had one of the nations highest investor penetrations, which was especially felt in lower-priced neighborhoods.
Tucsons slower growth economy meant fewer bidding wars, and investors were less prevalent than in Phoenix.
grew, but much of the activity stayed near the city.
Some relief comes from townhomes/condos in Flagstaff, but even those are pricey.
However, these areas have lower inventory and less economic growth, so sales volumes were smaller.
Buyers stretched budgets to get a standalone home, valuing the space and long-term appreciation.
Condos and Townhomes
Attached housing became a crucial alternative for budget-conscious buyers.
Condominiums and townhomes, typically priced below single-family homes in the same area, saw increased interest.
The condo share of purchases by moderate-income buyers ticked up during this period as a result.
Manufactured Homes
Arizonas plentiful manufactured housing communities provided another affordable path to homeownership.
Arizona consistently ranks among the states with the most manufactured home placements.
Many such homes are in 55+ parks or in rural areas where land is inexpensive.
The downside is they generally dont appreciate as much as site-built homes, and financing can be harder.
Even so, this segment saw strong demand as other housing types moved out of reach.
But these were minority choices.
Upsizing for Space
A prominent trend in 20202021 was upsizing.
This was facilitated by low mortgage rates, which made larger homes more affordable on a monthly basis.
This contributed to high demand in suburban single-family markets.
They represented a significant portion of the moderate-income buyer pool.
This reflects how only higher-earning and later-life entrants could break into the market given the affordability challenges.
Their behavior was to get in while you might, which added to the competitive frenzy through 2021.
Meanwhile, a large cohort of homeowners simply stayed put in their current homes throughout this period.
This lock-in effect kept housing inventory tight.
This contributed to Arizonas low listing inventory in 20222023.
Some also saw it as an investment, planning to short-term rent the second home part of the year.
Essentially, cheap financing and remote work blurred the line between primary and secondary residence for some middle-income buyers.
Many moderate-income families could scoop up homes at depressed prices or via foreclosure sales.
In fact, Arizona home prices hit multiyear lows around 20112012, and investors dominated those sales.
In 20182021, by contrast, it became a severe sellers market.
Prices hit record highs each year through 2022, and inventory was at record lows.
Instead of foreclosures, buyers faced bidding wars.
The share of affordable homes statewide was far higher a decade ago than in the 2020s.
Homeownership rates dropped to the low-60s%.
The typical buyer in 2022 had a much higher income than the typical buyer in 2012.
Investor Dynamics
Investors played roles in both periods but in different ways.
This arguably helped stabilize the market by 2012 but also converted a lot of homes into rentals.
Their market share hit new highs (as noted, ~2030% of sales in Phoenix).
Those who did buy in 20092012 got great deals, but they were few.
As the economy recovered mid-decade, buying picked up slowly.
By 2022, rent burdens were breaking records.
Rising Rents and Declining Affordability
Renters saw costs jump dramatically.
for rent growth as people flooded the Sun Belt).
Even Tucson saw rents climb by double digits in 2021.
These increases far outpaced income growth, leading to worsening rent burdens.
About 26% of renters were severely burdened (over 50% of income to rent).
This was a sharp rise from the mid-2010s when closer to 45% of renters were cost-burdened.
Supply and Demand Imbalance
Several factors drove the rental crunch.
After 2010, many ex-homeowners became renters (post-foreclosure), and new household formation picked up.
But new housing construction lagged Arizona building in the 2010s was well below 2000s levels.
This created a housing deficit by the late 2010s.
When the pandemic migration boom hit, vacancies dropped to record lows.
In Phoenix, rental occupancy hit ~96% in 2021, effectively full.
Moderate-income households found it hard to even find available units.
Nonetheless, rents remained much higher than pre-2018, locking many renters in place.
And indeed, many did scramble to purchase homes to escape endless rent hikes.
But rental affordability was still worse than a decade ago.
Statewide, the median rent-to-income ratio stood at 32% in 2022, up from ~29% in 2015.
The Growth of Single-Family Rentals
The surge of investor purchases in 20202022 also impacted the rental trends.
Many of the homes that investors bought were turned into single-family rentals.
This added rental supply in scattered subdivisions, which one might think would help renters.
However, investors often charged premium rents given high demand.
In summary, rental trends underscore the affordability squeeze on Arizona households in the late 2010s and early 2020s.
Both renting and buying became more expensive relative to income.
The recent period reversed that, culminating in a housing affordability challenge across both tenure types.
