The latest housing report from the Common Sense Institute reveals that while home prices in Arizona have dipped slightly in recent months, that relief may be short-lived as slowing permit activity threatens to deepen the state’s long-term housing shortage.
According to the Common Sense Institute (CSI), although average home prices in Greater Phoenix declined by 1.0% in Q1 2025 and are down 6.9% from their July 2022 peak, affordability remains historically low.
CSI’s analysis shows that the average home is still 53.6% more expensive than in 2019, and monthly mortgage payments have more than doubled over the same period.
Key Findings
- Arizona maintained a large housing deficit through Q1 of 2025. CSI estimates that Arizona is currently facing an immediate housing shortage of 56,047 units – only marginally down from the revised 56,812 estimate for 2024. Additionally, the pace of permitting in 2025 fell nearly 20% relative to 2024 totals, meaning that the state is now on pace to never close the current deficit (absent other changes).
- At $434,797, the average house remains nearly $70,000 (+20%) more expensive than it otherwise would have been if home prices had maintained the steady pre-pandemic trend. Despite prices declining since December 2024, it would still take nearly two years (-36% since Q4 2024) for housing prices to fall back in line with the 2012-2019 trend if prices continued to decline at this pace.
- Homeownership remains financially burdensome. Historically, households in Arizona needed to work about 45 hours/month on average to afford their mortgage payment at current market wages, interest rates, and housing prices. At the prevailing hourly wage rate, today it takes over 65 hours of work to afford a monthly mortgage payment (-3.1% since Dec 2024). Alternatively, to afford the average home, a household needs to earn $96,490 (92% of the average household income) under conventional mortgage guidelines.
- Arizona earned a “D” rating on the CSI Housing Report Card for Q1 2025 – a decline from the previous grade of “C-“. A combination of various inputs into the health and accessibility of Arizona’s local housing markets, this decline is largely a reflection of the low permitting-to-shortfall ratio and the estimated length of time it will take to close Arizona’s housing deficit, and particularly the decline in the recent pace of permitting.
- Maricopa County – the state’s largest county by population – saw no improvement from its D rating in the previous quarterly report. 79 of the 90 cities and towns in Arizona had a housing deficit in 2023 – the latest data available for cities and towns (unchanged).
After accounting for the most recent rise in interest rates, conditions for a homebuyer have never been more miserable in Arizona – the cost to service a new mortgage are still more than double what they were at the close of 2019, despite the recent price declines. Even after accounting for overall inflation, housing prices (mortgage costs) are over 20% (68%) more expensive relative to pre-pandemic levels.
While the demand for housing today is much lower than it was during the 2020-2022 period, homebuilding has not been sufficient to catch up to and lower the state’s persistent housing deficit. CSI estimates the current “instantaneous” housing deficit for the entire state sits at 56,047 units as of Q1 of 2025 – only marginally better than the revised deficit for 2024 of 56,812 units. On a “cumulative” basis through 2024, the state is short 121,334 units.
For about two years, the housing market has been paralyzed by an absence of both buyers and sellers. More recently, there appears to be a shift towards more sellers than buyers, though the underlying imbalance between the supply and demand of housing remains. Although CSI now expects some downward price pressure in the coming months, new home building remains the primary mechanism by which Arizona and the U.S. more broadly can solve its persistent housing affordability issues over the long term and avoid more recent volatility.
Housing Affordability
Home prices fell slightly through Q1 (down 0.9% in Q1 relative to Q4 2024; down 1.3% as of April) but remain just 6.9% off the July 2022 peak. Prices in the fast-growing Phoenix Metro fell 1.0% relative to Q4, and as of April are 8.2% below peak. As of the latest data available from April, the average home in Arizona costs $434,797 – $151,649 more than at the close of 2019.
CSI estimates that the average home in Arizona is $62,826 (17%) more expensive than it otherwise would have been if home prices had maintained their steady pre-pandemic trend. Given the current pace of price declines since Q4 (-0.31%/month), it would take 23 months for house prices to return to the 2012-2019 trend.
Homebuyers Misery Index
The Homebuyers Misery Index fell to 105.3 at the close of Q1, representing a 0.79% decline since the close of Q4 thanks almost exclusively to falling housing prices in the Phoenix Metro. The average 30-year fixed mortgage rate at the close of Q1 fell 0.07 percentage points from the close of Q4, however data through May shows rates rising again (+0.10 percentage points above Q4), which may increase future readings of the Misery Index.
As a reminder, the ‘Misery Index’ sums normalized and equally weighted home prices and 30-year mortgage rates to measure effective costs of home buying relative to historical levels. The index is set to a long-run average value of 0. Conditions better than the long-run average are represented with negative numbers, and relatively more expensive conditions with positive values. Interestingly, excluding the two high-volatility periods of the ‘housing market bubble’ in the early 2000s and the current post-pandemic period, the index is relatively flat – generally rising home prices over time have been offset by an almost equally fast decline in interest rates. Although homebuyers have experienced some relief recently, the combination of high home prices and interest rates continues preclude many buyers from entering the market.
Please, move somewhere else.
without reading – ‘move back to California’ your bringing your cluster…. with you’