If the Arizona housing market had a crystal ball, its forecast would read: “cautious optimism.”

Experts across the housing industry, from builders to bankers, forecast a 2% to 5% increase in existing home sales, even as the country deals with economic uncertainty. Median home prices are expected to stay relatively stable, supported by rising inventory, strong in-migration and job growth, especially in the Metro Phoenix area, which is widely expected to be one of the top 10 housing markets in the U.S. this year.

Underlying those hopeful projections are complex realities: Affordability pressures, mortgage rate volatility and policy questions continue to shape buyer behavior and development strategies.

To better understand the landscape, Az Business spoke with homebuilders, brokers, mortgage lenders, title professionals and real estate attorneys who offer a comprehensive look at what’s happening in Arizona housing and what’s coming next.

A Shifting Mindset

Despite the sometimes bleak headlines, many Arizona real estate professionals say the local market is far from stagnant.

“The headlines scream doom and gloom, but it’s busy, we’re working hard,” says Mike Zschunke, a real estate broker and agent in the Phoenix area who primarily handles high-end properties in North Scottsdale. “Sellers think it’s 2021 and buyers think it’s 2008. Getting everybody on the same page is the hard part,” he says.

While the frenzied bidding wars of the pandemic era have cooled, demand hasn’t disappeared. For Zschunke, business continues as usual.

“I wrote four offers last week,” he says. “One was on a $6 million listing, we came in closer to $5 million based on comps. But the seller didn’t need to sell, so they wouldn’t budge.”

Buyers are adjusting to higher interest rates with more confidence than expected. For serious house-hunters, 6% is no longer a deal-breaker.

“They know if rates come down, prices will just go up,” Zschunke adds.

That sentiment is echoed by experts on the lending side. David Hyde, vice president and senior home loan manager at BOK Financial Mortgage, says rates are hovering between 6% and 7%, but qualified buyers are still moving forward.

“If you can afford to buy, nows probably a good time,” Hyde says.

Pending home sales rose 6% in March and April and while inventory is ticking upward, it’s still falling short in high-demand neighborhoods.

“We’re seeing more homes come to market

“We’re seeing more homes come to market,” Zschunke notes, “but we’re not where we need to be.”

Demand Drivers: Why People Are Still Buying

Phoenix continues to be a magnet for new residents and investors.

“I’m cautiously optimistic, quite honestly,” says Brad Schoenberg, division president at Taylor Morrison. “In the great state of Arizona, we don’t have hurricanes, we don’t have earthquakes, we still have great migration from feeder states from around the country, we are still relatively affordable when you compare us to competing markets, whether that is other markets in the Southwest or if you stretch into Denver and definitely when you stretch back over to California.”

A key driver is economic diversity. “We’re not just about construction anymore. We’ve got tech, biosciences and manufacturing, especially with the TSMC chip plant in the North Valley and Intel in the South Valley. That’s drawing high-wage workers who want to live close to where they work,” Schoenberg explains.

The U.S. Census Bureau supports Schoenberg’s observations: Phoenix has been a hot spot for growth over the past decade. Between 2020 and 2024, the city has seen a 4% increase in population.

Rising household incomes has also expanded opportunities for buyers in the Phoenix area. Schoenberg notes that the median household income in the metro region reaches approximately $90,000.

“Phoenix is a growing market,” says Derrick Barker, CEO of Nectar. “The in-migration and job growth make this one of the top places to deploy capital.”

Buyer Behavior

Buyer psychology has shifted since the pandemic and the market reflects that, experts say.

“Sellers don’t need to sell and a lot of buyers don’t need to buy,” Zschunke says. “Many are moving up or down, but they’re comfortable where they are.”

It’s an attitude shaped by what many now call mortgage lock-in. About 60% of homeowners have a mortgage rate under 6%, creating a sense of being stuck, yet not entirely without options.

“They feel trapped,” Zschunke says, “but many have enough equity to move if they want to. They just need someone to show them how.”

The profile of the first-time buyer has changed as well. Twenty years ago, the average first-time buyer was around 30 years old, today many are closer to 40. With that shift comes more income, more stable careers and often financial support from family, giving them a different set of expectations and pressures than previous generations.

Even in the luxury market, caution is becoming the norm.

“A lot of people buying large homes are coming in with huge down payments,” Hyde says. “It’s a shift we didn’t see as much before and it shows how people are thinking more conservatively, even at the high end.”

While affordability remains a growing concern, it hasn’t shaken residents’ loyalty to Arizona. According to new data from BMO’s Real Financial Progress Index, only 49% of Arizonans say they’d consider leaving the state to afford a home, meaning more than half would rather weather higher costs for the lifestyle, opportunity and identity the state continues to offer.

Affordability And Inventory

If there’s one issue that unites residential real estate professionals, it’s affordability.

“Affordability and consumer confidence are what keep me up at night,” Schoenberg says. “There’s a lot of supply pressure. We still don’t have enough affordable homes for the people who want them.”

Although Phoenix is seeing a wave of new construction, the benefits aren’t being felt evenly across the market. Barker notes that a large number of new units are coming online this year, potentially hitting a peak. Despite the influx, financing remains a challenge. Lenders are tightening up and properties with solid fundamentals are struggling, not because they’re flawed, but because of bad timing.

“Liquidity is down,” Schoenberg explains. “There are great properties facing distress simply due to timing.”

That disconnect creates opportunities for some investors, but also hardship for others.

“We’re investing alongside developers who have solid assets but can’t get the financing they need,” he continues.

For homeowners, many choose to renovate rather than relocate.

“Home equity loans are up,” Hyde says. “People are adding pools, updating kitchens, turning 20-year-old homes into more modern spaces. It’s often easier than buying something new at today’s prices.”

Financing And Lending: A Shift Toward Readiness

While financing is still accessible, the process is more difficult than it used to be.

“Pre-approval is the new standard,” Hyde says. “We used to do pre-qualifications over the phone. Now we’re reviewing credit, income and assets up front, so the only thing missing is the house.”

In a competitive market with limited inventory, buyers need every advantage.

“It’s the difference between closing in two weeks versus 45 days,” he adds. “That timeline can be critical when multiple offers are on the table.”

Lenders are no longer willing to take chances on incomplete applications or vague financials. That helps both buyers and sellers avoid surprises during escrow.

Despite recent bank consolidations, financing remains steady.

“The lending industry is strong,” Hyde says. “We’re ready to lend, but buyers need to be prepared.”

Preparation now means more than just having a good credit score. It includes having documentation ready, understanding one’s budget clearly and being realistic about long-term affordability. Those who show up informed are the ones receiving the house keys.

Where Builders Are Betting

With buyers focused on value and proximity to jobs, developers are taking a strategic approach to growth.

“We’re following infrastructure,” Schoenberg says. “Loops 101, 202, 303, those investments made growth possible in all directions.”

The north side of Phoenix draws extra interest due to its strong schools and job opportunities. However, development there comes with unique challenges.

“We like the north side, but much of the land is held by the state and has to go through the auction process,” Schoenberg says.

He adds that water access is another critical factor influencing where growth can occur. Cities with designated water providers are positioned to expand more easily than those relying on groundwater.

Developers are diversifying their focus as well, building for a wide range of buyers, from first-time homeowners to retirees.

“We serve everyone from the starter home market to age-qualified communities,” Schoenberg says. “That flexibility helps us ride out any demand shifts.”

Legal And Regulatory Environment

For now, Arizona’s legal and regulatory environment feels stable, though industry insiders remain vigilant. Casey Blais, a real estate attorney and partner at Burch & Cracchiolo, describes the landscape as steady with no major shifts looming, at least for traditional residential and commercial real estate.

“That said, affordable housing could be a game-changer,” Blais notes. “Tax incentives for converting commercial properties into residential units are one area where we might see creative solutions emerge.”

Concerns about lease and loan defaults are also on the radar.

“While we’re not seeing anything close to the stress levels during the pandemic, there’s cautious monitoring. The market’s unpredictable, so everyone stays alert,” Blais continues.

Local governments could introduce zoning changes or new policies as they grapple with growing housing demand. Industry players actively engage with lawmakers, aiming to strike a balance between encouraging development and maintaining community stability.

In short, the legal climate is calm but watchful, like a reflection of the market itself.

2025 Outlook

When analyzing the state of the market in 2025, Zschunke puts it plainly:

“Uncertainty is always there. But buyers aren’t scared off by 6% mortgage rates anymore. They’re informed and ready.”

Schoenberg, the builder, agrees:

“We’ve had some unpredictable years. Now, things are settling into a new normal, and that’s healthy.”

Hyde offers another perspective:

“There are pockets of struggle, including some pre-foreclosures. But those realities create opportunities, too. Staying realistic is key.”

Barker, the investor, sums it like this:

“There’s always business to be done. We’re focused on solid assets and long-term partnerships. For those willing to play the long game, Phoenix remains a smart bet.”

As the rest of the year unfolds, Valley residents can be certain that the housing market isn’t crashing — it’s recalibrating. As prices stabilize, inventory will gradually improve and buyers continue to adjust to a more measured financial landscape. The frantic pace of recent years has softened, but activity continues, especially from well-prepared, intentional buyers.

Phoenix’s appeal continues to grow, fueled by diverse job growth, quality of life and steady in-migration. Yet, challenges like affordability, policy uncertainty and equity gaps still cloud the future.

“We’re bullish on Phoenix, but we’re also pragmatic,” Schoenberg says. “The fundamentals are strong. It’s about patience and perseverance.”   – more at azbigmedia.com