Last updated on October 27th, 2023 at 07:11 am

Phoenix is no stranger to economic fluctuations and volatility. Investors flocked to Phoenix during the Great Recession, snapping up houses at attractive profit margins. It was one of the best cities in the country to pick up homes at great prices. 

In the 1st quarter of 2019 the median sales price of a home in Maricopa County was $275,000.

Median prices for homes have increased an astounding 56% based on stats from the 1st quarter 2023!

Prices have now declined significantly and supplies are in short supply – could this be an early indicator that a housing bubble may soon burst?

State of Housing in Maricopa County in 2023

Phoenix is located in Maricopa County, here are the latest housing trends for the 1st quarter of 2023.

  • The median sales price is down 8.3% YOY to $431,000
  • Days on market (78) is up 136.4%.
  • Closed sales are down 27.4% to 14,196.
  • Months of supply is up 256% to (1.7).

Quick answer

While the inventory in Phoenix spiked at the end of 2022, it has since dwindled. There is a shortage of single-family homes.  No, there is no imminent crash coming to Phoenix. 

  • Seasoned agents suggest a 6 months supply of homes puts buyers and sellers on equal footing
  • With 2.28 month's of supply, Phoenix is still a seller's market
  • The inventory in March has decreased 52% decrease from January 2023.
  • All crashes have one thing in common, a spike in the inventory of homes on the market. 
  • For that to happen again, we need to see rising unemployment and rising inventories. 
  • Buyer demand is still strong for homes and shows no signs of abatement. 
housing inventory
Courtesy of ARMLS
months of housing supply march
Courtesy of ARMLS

What is a housing crash

Crash refers to any sudden and significant decrease in market values. Crashing occurs most commonly in stocks markets; however, they can also happen with commodities and bond markets.

Stock market crashes can happen for various reasons, with panic selling by investors being the most prevalent cause. 

Investors might sell to cover debts or margin calls or simply wish to offload assets quickly before it all collapses further.

Phoenix housing market is no different: rising mortgage rates have caused real estate sales to decrease in recent months, leading to decreased demand in real estate investments.

Mortgage rates probably won’t fall until the federal reserve is done raising rates.

But will the damaged already have been done?

Experts remain hopeful that demand will return in due time and stabilize.

One report by Livable predicts that Phoenix housing market will shift into buyer’s territory by 2023, which should provide greater affordability for homebuyers. 

Unfortunately, several factors could keep prices elevated until then – including an insufficient inventory and price bubble from the pandemic.

12news and Axios have also reported that Phoenix housing market may collapse within several years, with prices declining up to 25% due to factors like recessionary pressures and increasing interest rates as well as sellers reluctant to sell their current properties. 

Many economists, however, disagree and assert that Phoenix housing market is currently experiencing only early signs of correction – not crash.

 According to Danny Court from Elliot D. Pollack & Company in Scottsdale, home prices in Phoenix area have already decreased 10% from their peak and could drop 15% this year.

Home buyers have begun to pay cash and remain vigilant despite a price decline, though their options are dwindling more rapidly than before the pandemic; additionally, construction delays are making it even harder for them to find their dream property at an attractive price

Once they do locate it however, if they act fast they could buy it at a bargain if their current property sells quickly enough; otherwise they won’t be able to afford their dream one.

average rent in phoenix az 2023
Courtesy of Rentcafe

Buying demand is still inflated, but many potential buyers have decided to rent as its cheaper than buying with persistent mortgage rates. 

  • Average rent in Phoenix, AZ is $1553 per month.

Mortgage Rates and Interest Rates

It’s much harder for a family to afford a monthly payment at these sustained interest rates levels.  

  • Even with a high credit score, and down payment, renting provides a cheaper option for many people. 
  • Inflation has priced many families out of the market for purchasing a home. Indicators are saying interest rates aren’t coming down anytime soon.
  • There are more cash buyers today than most people can remember in recent memory.

How much Inventory

Nothing is more of a predictor of a crash than housing inventory on the market. Its very similar to supply and demand.

If the number of listings on the market increases faster than the demand for homes, prices can decrease rather quickly. 

  • Total housing inventory sits at 16,992
  • Currently the average days on market for a home in Phoenix is 80.
  • Data from ARMLS shows 7,417 home sales in Phoenix; this represents a 6% from sales in January. 
average days on market in phoenix
Courtesy of ARMLS

When Was the Last Time Phoenix Crashed

Phoenix housing market has been one of the fastest-growing real estate markets nationwide in recent years – but is it about to crash?

Phoenix housing market hasn’t experienced a major crash since 2008 when it was hit by the subprime mortgage crisis and many homeowners went into foreclosure, while investors lost investment properties. 

According to The NY Times, at one point prices in Phoenix dropped 50% form their highs in 2006. 

For the record, no one is predicting anything like that in 2023.

Since then however, Phoenix housing market has recovered and remains one of the most affordable in US.

Even after years of troubled history, Phoenix remains a vital economic hub of the Southwest and remains popular with new residents looking for homes. It boasts robust population growth that attracts many newcomers every year.

As Phoenix’ economy has flourished, more employers have chosen to relocate here, leading to record levels of homebuilding activity in Phoenix.

But even with this growth, not enough homes exist to satisfy demand, meaning homes could remain on the market for an extended period.

As prices decline, buyers must search for alternatives in the existing inventory if they want to purchase real estate. 

While this might be challenging for first-time buyers, it is wise to begin browsing properties early so you can make an informed decision when making your decision.

Even though Phoenix real estate market has experienced strong growth over recent years, many still consider it a “bubble.”

 Goldman Sachs issued a memo to its clients that predicted Phoenix may experience another crash similar to 2008 Great Recession.

Bank forecast that home prices in Phoenix would decline 25% between 2023-2024. Although most experts consider this a bad sign, others suggest Phoenix could see some relief without experiencing an all-out crash.

One reason the Phoenix housing market may be declining is due to rising mortgage costs, as fewer people can afford them and this causes less homes to be sold within the city.

Foreclosures in Phoenix

Foreclosures can have an adverse affect on the housing market by increasing the housing supply and certainly can create a fully blown housing crisis. 

Just look at the Great Recession as an example of what can happen.  Remember though that usually foreclosures will increase when unemployment rises.  

Jobs are extremely important when it comes to distressed properties coming to market. 

Homeowners need the security of employment in order to pay the loan back on the property. 

  • According to Armls, there are 1,153 distressed properties heading towards foreclosure.
  • Last year during this same time, there were 753.
  • Distressed properties increased 11% from January 2023 to March 2023.
distressed properties
Courtesy of ARMLS
Courtesy of ARMLS

Why Did It Crash

Phoenix has been one of the hottest housing markets in the U.S. over the past two years. Due to high demand and limited inventory, prices have reached record heights.

Experts remain optimistic that home prices will remain relatively steady over the coming months despite rising interest rates, although some remain concerned that the market might collapse in due time.

During the 2008 housing crash, hundreds of thousands of homes went into foreclosure, forcing major mortgage lenders to declare bankruptcy as a result of increased predatory lending practices and loose federal regulation on banks and lenders.

Phoenix metro was among the hardest hit during this crisis, yet experts predict it won’t experience another major collapse anytime soon as its economy and market fundamentals are much stronger now than during its most recent crash.

Phoenix may no longer be in a bubble, but it remains vulnerable to real estate crashes and price declines, since housing bubbles form due to high demand combined with limited supply of homes for sale.

Due to a limited supply, interest rates tend to rise and make homeownership unaffordable for many potential buyers. 

Either people need a high income in order to afford lower mortgage rates payments, or they will need to pay cash for the property.

Therefore, sellers are forced to sell at lower prices in order to remain viable.

No doubt about it: Phoenix real estate market is one of the hotbeds of real estate investment in America, but rising interest rates have many experts concerned for the city’s future. Will Phoenix housing market crash in coming months?

Goldman Sachs reports that home prices in the desert metro could fall by as much as 25% by 2023, sparking fears among some analysts of an imminent major downturn, while others see this change more as an adjustment than an actual change.

An increase in mortgage fees will likely cause homeowners to incur losses on their investments; however, they may still be able to sell their houses at a profit and increase sales, thus helping stabilize the housing market and prevent a crash from taking place.

Housing Market Outlook for 2024

  • Nobody knows what the situation will be for 2024, but it doesn’t make sense for a seller to sell their property and then buy a new home with a much higher, and likely unaffordable interest rate.
  • As of today Bankrate says the national average of a 30 year mortgage rate is 6.81%.
  • As long as supply is very low, its hard to see a crash coming. 
  • However if a recession hits Phoenix hard, and people must sell their homes, and supply spikes, we can see a huge drop in prices, and potentially a crash!

How Can Buyers and Sellers Make Money During a Crash

America. Thanks to a vibrant economy and robust job market, home values in Phoenix have seen exponential increases.

Goldman Sachs recently issued a report suggesting Phoenix may experience a housing market collapse similar to the Great Recession of 2008. 

According to The New York Post, Goldman has warned clients of Arizona that housing prices will decrease by 25 percent between 2023-2024.

Buyers who are prepared to put in extra work in order to purchase their dream home at an appropriate price will have an edge during a real estate crash, not only saving on mortgage interest payments but also benefiting from tax breaks as their primary residence’s mortgage interest can be deducted on tax returns.

As a buyer who pays cash or gets a loan, it’s best to find an agent familiar with the local market who can guide and negotiate on your behalf with builders and sellers, while offering advice about ideal locations and ways to make the home more cost-effective for you.

Selecting a real estate broker who knows their market intimately and can guide you away from making costly errors can save both time and money in the long run.

An experienced real estate agent can also guide you through the entire process from home finding to closing deals, answering all of your questions and giving honest opinions as to whether the property is worth its price.

The condition of the property is always important. If its condition is poor, selling it could prove more challenging since people will likely pay less than full price for such homes.

If the property is in good shape, you should be able to sell it quickly for a fair price. Painting and flooring upgrades will make getting this goal more achievable.

Frequently Asked Questions

Sellers are usually most affected by a housing crisis.  Housing demand usually falls and houses decline value. 

This usually turns into a buyers market as home prices fall quickly .

Foreclosures will increase as well as the amount of inventory on the market. Also a spike in unemployment can start a housing crisis!