The capital of Arizona, the City of Phoenix is known for its year-round sunny weather and beautiful desert location. Interestingly, the “City of the Sun” is also the fifth-largest city in the United States.
Phoenix residents enjoy a myriad of outdoor adventures, sprawling resorts and golf courses, and the best that the southwest culture has to offer.
There are many excellent reasons to make this exciting city your home. If you’re thinking of buying a house in Phoenix, now would be a good time to do it. Start by getting a deeper understanding of the Phoenix housing market for 2022 to help you prepare for the journey ahead.
Is the US housing market cooling down?
Before zooming in to the Phoenix housing market this 2022, understanding the U.S. housing market in general is crucial. Since the start of the pandemic, home prices across the country have been increasing, and this trend continued to be observed in the first quarter of the year. At the start of the year, the median home sale price nationwide was $428,700, and the annual appreciation rate stood at 19.2%.
Things are likely heading in a different direction, however. Experts predict that the housing market is about to cool down, leading to lower home prices. There is also a projected decline in sales of new and existing homes, which is expected to reach mid-single-digit within the year.
Rising mortgage rates
Rising mortgage rates will contribute to the expected softening of real estate activities. Experts also noted that the robustness of the market could get affected by possible changes in homebuyers’ behavior in response to prevailing economic conditions.
However, there’s no reason to fear a repeat of the 2008 housing crisis. Though there’s a rise in mortgage rates this year, the circumstances and surrounding factors are different. The balance sheets of today’s households are more stable, and unlike in 2008, the recent housing boom doesn’t rely on excessive borrowing.
With the right strategies and careful planning, the impending cooling of the market may lead to a more balanced market, providing more opportunities that are favorable to homebuyers.
Phoenix, AZ housing market trends and forecasts for 2022
The projected cooldown of the U.S. housing market is expected to be felt in Phoenix as well. However, it may not be as “cool” as you think. The market will most likely remain competitive so be prepared to be in a bidding war for your dream home with other interested buyers.
As of May, 2022, the average sale price of homes in the city was $475,000, up 14% from the previous year. Experts predict home prices in Phoenix to rise to about 20% this year. It may be lower than last year’s increase of 32%, but the drop is not as big compared to other key cities.
Housing inventory remains tight, and this contributes greatly to making the city a hot seller’s market despite the expected decline throughout the country.
According to April, 2022 data from the Arizona Regional Multiple Listing service, housing inventory in Phoenix was down 6.1% from the previous year. As of May, 2022, the supply of homes was only at one month – significantly lower than the four to six months’ supply needed for a balanced market.
Opportunities in foreclosures
With such tight inventory, homebuyers may find good opportunities in foreclosures. Back in February, foreclosures went up by 11% from the previous month and a 129% increase year-over-year. Analysts say that this will be the trend through the last quarter of the year.
This increase is seen as the gradual normalizing of the foreclosure activity in Phoenix. The COVID-19 pandemic forced the government and various industries to protect homeowners from defaulting. The number of completed foreclosures in February also signified the efforts of mortgage servicers to catch up with the backlog in processing loans that were either delinquent or approved for foreclosure before the pandemic hit.
For homebuyers, foreclosures present an opportunity to buy properties at prices below market rates. With the help of your Realtor, you may be able to find a rare chance to realize significant savings in buying a home.
Should you invest in Phoenix, AZ real estate?
More investors are buying homes in Phoenix mainly because of the city’s high price-to-rent ratio and rent growth. This puts Phoenix on top of 30 other major markets for homes.
What makes Phoenix a great location for real estate investments?
- Fast growth
The city’s population growth over the last decade was unprecedented. In the last 10 years, Phoenix has outpaced all other US cities with a population growth of 11.2%. This is attributed to various reasons, including the sprouting of tech companies, retirees moving to the city, and in-bound migration.
With over 1.6 million residents in Phoenix and almost 4.4 million in the Phoenix-Mesa-Scottsdale metropolitan area, Phoenix today is the most populous city in Arizona and the fifth most populous in the country. The growing number of tech companies is turning Phoenix into the next Silicon Valley. As a result, it’s projected that the city will see a 1.6% job growth until the end of the decade.
Aside from the tech giants, small business employment will drive the job market, which is growing roughly at 6% year-over-year.
- Strong rental market
Homeowners and homebuyers looking to turn their properties into rental homes will find the renters market appealing. Rent prices increased by 19% year-over-year with single-family homes accounting for 69% of housing units being rented. If you have a 3-bedroom home, the median rent for your property is around $2,115 a month.
Vacancy rates are also at a record low. It fell to 3.8% in 2021, which is the lowest in over two decades. Investors can command higher rent prices while enjoying lower tenant turnover. Renters are likely to stay put in a house for at least a year, so rental home owners can expect a steady cash flow.
- Hedge against inflation
Rental properties have always proved to be a good hedge against inflation. Rental rates typically rise with inflation while expenses associated with rental property investments, including mortgage payments and maintenance costs, generally remain steady.
- Strong appreciation rates
Phoenix property values have enjoyed tremendous appreciation in the last 10 years. From 2021 to 2022 alone, the city enjoyed an appreciation rate of 29.5%, the highest in the country. In the last ten years, Zillow reports an appreciation rate of around 355% or an average of 35.5% annually.
Why people are moving to Phoenix
Phoenix is one of the most sought-after communities in the United States, and is ranked by US News and World Report as one of the top 40 best places to live in the country. It’s no wonder approximately 50,000 people move to the city each year.
New Phoenix residents come from a wide array of cities and countries, particularly:
- The Los Angeles metropolitan area
- The Tucson metropolitan area
- Asian countries
- The Chicago metropolitan area
- Central American countries (excluding Mexico)
Living in Phoenix comes with a host of benefits, foremost of which are the following:
- Relatively low cost of living
Compared to other key cities like Sacramento and Los Angeles, Phoenix’s cost of living is significantly lower. According to Payscale.com, the cost of living in the city is just around 4% higher than the national average, and is about 46.5% lower than San Francisco and 30.5% lower than Los Angeles. Property taxes are also lower compared to those in bigger cities.
- Excellent job opportunities, particularly in tech
New residents searching for jobs will find plenty of opportunities in the technology industry. Phoenix is considered one of the country’s leading hubs for software and tech companies. Some of the leading tech giants operating in the city include Apple, Intel, IBM, Uber, and Yelp.
The local government plays a major role in attracting big tech companies to invest in the city, maintaining business-friendly operational costs that are 36% lower than California’s.
- The perfect “Zoom Town”
Phoenix is also building a reputation as a “Zoom Town”. A Zoom Town is a place preferred by people who work remotely and rely on video conferencing technologies like Zoom (hence the name).
The pandemic pushed millions of Americans to look for Zoom Towns to continue their work without having to physically go to their offices. These people typically come from bigger cities like Los Angeles, New York, and San Francisco. With its technological resources, great quality of life, and convenient location, Phoenix has been the Zoom Town of choice for many of these remote workers.
- Better mobility
Driving around the city is relatively enjoyable. Though there’s still some congestion from time to time, traffic is not as bad as in bigger and more congested cities like Los Angeles. With its well laid-out streets, it’s hard to get lost in Phoenix.
If you don’t have a car, bus and light rail systems are available, albeit limited in reach and size. Another option to consider is biking to work, especially if your office is in Downtown Phoenix. Bikers pass through Bicycle Boulevard, which is a bike lane that stretches 4.6 miles long.
- Highly-rated schools
The city’s excellent school systems are another good reason to move your family to Phoenix. Phoenix is home to some of the finest and highest rated schools in Arizona. Parents can enroll their children in leading school systems like the Scottsdale Unified School District and the Chandler Unified School District, which boast consistent ratings and high graduation rates.
- Wealth of attractions and activities
With its location in the upper end of the Sonoran Desert, Phoenix features uniquely beautiful sceneries that give a fresh perspective to wide-open spaces. The rugged mountains and year-round sunny weather are perfect for a wide range of outdoor adventures and activities, including golf. Phoenix and the surrounding areas are home to numerous golf clubs and golf communities that feature a host of luxury amenities.
Other top attractions in the city include Lake Powell, which is the second-largest man-made lake in the U.S. It extends across the Arizona border into the southern part of Utah. Phoenix Mountains Preserve feature miles of trails, and Desert Botanical Garden offers desert experiences and fun encounters with desert animals.
Downtown Phoenix is home to a wide array of excellent restaurants, shops, and nightspots for those who prefer a more relaxed form of recreation.
- World-class healthcare
Some of the top hospitals and healthcare facilities in the US are found in Phoenix, including St. Joseph’s Hospital and Medical Center, the Banner Boswell Medical Center, and the Mayo Clinic Phoenix.
Essential Tips for Investing in Phoenix Real Estate
Entering the Phoenix housing market is more than just about finding a property that you love. It involves a lot of research, planning, and preparation. Here are some key tips to consider:
- Establish your investment goals and budget
Do you want to invest in a home to reach a short-term or long-term target? Determine the type of property that will help you achieve that goal. Investing in Downtown Phoenix, for example, opens up many target groups for a home rental business.
- Get busy with the numbers
Create a budget and stick to it as closely as possible. Before agreeing to any deal, calculate how much your investment will cost and the potential returns using conservative projections.
- Study the city and the surrounding areas
Investing in the Phoenix housing market in 2022 doesn’t strictly mean buying a home within the city. You may also consider surrounding neighborhoods that offer promising returns. Some of the other areas to look into include:
- Chandler – Located in the East Valley, Chandler is part of the Phoenix Metropolitan Area and is famous for its festivals, premiere golf courses, and tech economy.
- Glendale – This city brings a contemporary vibe mixed with a rich history and culture. Residents also love the sporting events and recreational venues around the city.
- Arcadia – Situated west of Old Town Scottsdale, Arcadia offers shopping and dining options, as well as easy accessibility.
- Tempe – The city is where you’ll find the Arizona State University, and is also home to a thriving art and culture scene.
These suburbs come with their own beauty, history, and potential. Glendale has many affordable properties, while Chandler is attractive to families and young professionals. Arcadia is also known for its hiking trails and urban setting, while Tempe is a hub for high-rise developments.
- Explore your financing options
Determine the most appropriate financing options for securing the property. A trusted Realtor can help explain your choices and recommend the most suitable one. Investors who cannot pay in cash may opt for a bank loan, a home equity loan, or owner financing.
- Work with a reputable real estate company
With all the intricacies that come with real estate transactions, connecting with a trusted Realtor with local expertise is crucial. A Realtor can help find the best areas and properties that match your investment goals. They also have the knowledge and tools to help you with your financial planning.
Reach out to Carol Royse before buying a home in Phoenix, AZ
If you’re looking to move to Phoenix or invest in a property in this one-of-a-kind community, the Carol Royse Team can point you in the right direction. With her extensive local knowledge and more than 30 years of industry experience, founder Carol Royse leads her team of 25 real estate experts in providing a smooth and seamless real estate experience in the city and the neighboring communities.
Learn more about the Phoenix housing market in 2022 from the Carol Royse Team and get expert guidance in buying or investing in real estate in the area. Call the team today at 480.776.5231, or send an email to carol(at)carolroyse(dotted)com. You may also leave your inquiries here.