Recent NewHomeSource posts have explored shining (South Carolina) and struggling (Las Vegas) housing markets. Phoenix, the nation’s third-largest housing market, sits somewhere in the middle.
The market has gone through a significant evolution since the start of the pandemic due to rapid in-migration and a dynamic housing market. However, many of the factors fueling growth – population gains, new investments, and an expanding employment base – have strained the market’s affordability and long-term economic balance.
An analysis by NewHomeSource parent company Zonda examines how Phoenix’s economy, demographics, and for-sale housing are evolving and what that means for current and future homebuyers.
Economy: Strong Job Market, Higher Costs
While Phoenix is not immune to the slowing job growth being experienced on a national basis, the metro has seen a 28% increase in employment since 2019 and a 20% rise in high-income employment over the same period. The health care and construction sectors remain anchors of the Phoenix economy while high-income jobs within the market have fared better than many other markets.
However, a strong job market has come with some tradeoffs. Local inflation is now 21.9% above its 10-year average, signaling that households are feeling the pinch of higher costs.
Looking ahead, Phoenix may be a market that is poised to benefit from the nationwide effort to reshore and rebuild American manufacturing capacity. The metro has attracted more than $100 billion in manufacturing investment, potentially creating new jobs across all income levels and fueling future housing demand.
Demographics: Phoenix’s Population on the Rise
Fueled by in-migration, Phoenix’s population has increased by 1.6% over the past year. Both domestic and international migration have fueled population growth in Phoenix, with new domestic residents originating from higher-cost metros like Los Angeles, Riverside, and Tucson.
The population growth in recent years has been concentrated at the two ends of the demographic barbell. The millennial population in Phoenix grew by 8.9% between 2020 and 2024 while the Baby Boomer population increased by 10.8% in the same period. This growth will establish a steady pipeline of housing demand across the first-time buyer, move-up, move-down, and second-home product categories.
The large pool of new residents is a positive development for Phoenix’s economy but means home shoppers are likely to face steep competition in the housing search.
Housing Landscape: Affordability Pressures Slow Market; Incentives Rise
Like many markets across the country, the Phoenix housing market has slowed in recent months due to affordability challenges facing consumers. However, the population and job growth outlined above suggests the pipeline for housing demand remains healthy.
Affordability, though, will likely challenge even the new residents in Phoenix. Since 2019, average incomes in Phoenix have grown by 27.5% while new home prices have increased by 40% and resale prices have increased by 65%. Some of the positive in-migration supporting population growth in Phoenix is also hampering local buyers. Higher-income migrants from Los Angeles, Seattle, and San Francisco can afford the higher priced homes in Phoenix and are limiting opportunities for buyers native to Phoenix.
As a result, new-home builders are having trouble moving inventory. According to Zonda, Phoenix led the nation with quick move-in homes (new homes that could be occupied within 90 days) per community, nearly doubling the national average. Additionally, over 90% of builders in Phoenix offered incentives on these quick move-in homes. For buyers, this means that there are deals to be had. While sticker prices may seem high for the market, the availability of design upgrades, mortgage rate buydowns, or price concessions can help hesitant buyers solve the affordability equation.
Affordability remains one of the defining challenges for Phoenix’s for-sale housing market. Since 2019, average incomes have grown 27.5%, while new home prices have increased 40% and resale prices 65%. Much of this home price growth has been fueled by newcomers cashing out equity from higher-cost markets like Los Angeles, Seattle, or San Francisco and buying in Phoenix instead.
The resulting affordability gap has sidelined many local buyers and contributed to a buildup of new home supply. Phoenix led the nation in quick move-ins (QMIs) per community in September at 4.8, far outpacing the U.S. average of 2.6.
While higher QMI levels supported sales over the past few years, the recent buildup reflects a demand pullback. This is evident in incentive usage, with 90.7% of Phoenix builders publicly offering incentives on QMIs, the 7th highest share among our top markets; only Provo, Sarasota, Cape Coral, Port St. Lucie, Raleigh, and Jacksonville reported higher incentive usage, according to Zonda data. The combination of incentive usage and selective price cuts has resulted in meaningful margin compression for many builders.
Bottom Line
Phoenix remains a market of contrasts: strong job and population growth paired with affordability pressures that test local buyers. For consumers, there are still opportunities in the market, but success may rely on buyers’ ability to explore incentives or act quickly.
