Housing affordability has become a pressing concern across the United States, and Arizona is no exception. This report analyzes the relationship between income levels, house prices, and affordability metrics in Arizona, highlighting key trends and challenges. It also explores the various factors impacting housing affordability, such as mortgage interest rates, property tax rates, housing availability, and government policies.
Median Household Income in Arizona
Arizona’s real median household income for October 2024 is $72,581 down from June 2024 is $74,375, representing a decline from the 2023 median income of $82,660. This reduction in income impacts the purchasing power of households in the state.
Housing Prices in Arizona
The median home price provides insight into the typical cost of a home, indicating that half of the homes sold were priced above this figure and half below. When considered alongside mortgage rates and other factors, the median home price serves as a key indicator of housing affordability.
In Arizona, the median listing price for homes dropped from $495,000 in October 2024 to $489,990 in November 2024. Meanwhile, the median sale price was $444,220 in October 2024, up from $435,839 in August 2024. For comparison, during the same period in 2023, the median listing price stood at $493,495.
Median and Average Sales Price of Houses Sold by Region
Arizona is part of the Western region. Median sales price increased notably from Q2 2024 ($529,900) to Q3 2024 ($549,200), reflecting a growth of 3.6%, and rose by 7% year-over-year from Q3 2023 ($513,200) in the Westen region.
Average sales price increased slightly from Q2 2024 ($608,300) to Q3 2024 ($610,300), a growth of 0.3%, and rose by 2.9% year-over-year from Q3 2023 ($593,100).
Median and average prices declined year-over-year across most regions except the West, where both metrics showed consistent growth.
The Northeast experienced the sharpest declines, particularly in the median sales price, suggesting potential challenges in the high-cost housing market.
The West emerged as the strongest-performing region, with both median and average sales prices increasing both quarterly and annually.
House price-to-income ratio
The house price-to-income ratio for Arizona stands at approximately 6.12 in October increasing from 5.65 in June 2024, indicating that the median home price is over six times the median household income. This ratio is well above the traditional affordability benchmark of 3.0, signaling that homeownership is increasingly unattainable for many residents.
Affordability Metrics
Affordability challenges are further underscored by the following metrics:
Required Monthly Income (30% DTI) for Home Ownership
To afford the median home listing price, a household would need a monthly income of $9,141 as of October 2024 in Arizona. This assumes that housing costs do not exceed 30% of gross monthly income.
From June 2024 to August 2024, there was an increase of 3.5%. From August 2024 to October 2024, required income rose by 1.8%.
Comparing 2023 to October 2024, required monthly income decreased by 5.4%, suggesting a slight improvement in affordability over the year.
Required Annual Income to Afford a Home
Required Income is steadily declined from 2023 ($115,911) to 2024-Jun ($104,132), and slightly increased to $109,693 in 2024-Oct. Median Income decreased from 2023 ($82,660) to 2024-Oct ($72,581), a sharp decline of 12.2%. There is a downward trend in Median Income from 2023 to 2024, while the Required Income remains much higher. The gap between Required Income and Median Income is significant.
Housing Affordability Index
The national affordability index stands at 72.31. Arizona’s affordability index drops at 66.17 for 2024 from 71.31 in 2023. This means that the median income reached 66% of the amount needed to afford the median home. The index indicates that housing affordability in the state is below national averages of 76.38, with lower values reflecting decreased affordability.
Executive Summary
In November 2024, home prices in Arizona were down 0.71% compared to last year, listing for a median price of $489,990 per FRED economic data.
In October 2024, home prices in Arizona were up 1.6% compared to last year, selling for a median price of $444,600 per Redfin data.
As of October 2024, a household needed a monthly income of $9,141 to afford a median-priced home. Between June 2024 and August 2024, this figure increased by 3.5%. From August 2024 to October 2024, the required income rose by an additional 1.8%.
Compared to 2023, the required monthly income in October 2024 decreased by 5.4%, reflecting slight affordability improvements.
The required annual income declined from $115,911 in 2023 to $104,132 in June 2024, before increasing slightly to $109,693 in October 2024.
On average, the number of homes sold was up 12.8% year over year and there were 7,835 homes sold in October this year, up 6,944 homes sold in October last year. The median days on the market was 56 days.
In October 2024 House Price to Income Ratio is approximately 6.12 indicates that it is less affordable considering income and price. But the required Monthly Income (30% DTI) is at $9,141 in October 2024 which is down by 5.36% from 2023.
Home Affordability Index is at 66.17 in October 2024 which indicates reduced affordability from the standard of 100.
But the national mortgage rate (30 years) is continued to drop and at 6.81% in November 2024 and it further drop to 6.6% in December 2024. So does the Arizona mortgage rate.
The average property tax rate in Arizona drop to 0.59% in 2024 from 0.63% in 2023.
This data highlights a significant affordability challenge in Arizona, driven by a high house price-to-income ratio and the substantial income required to afford median listings.
Other Influencing Factors
Housing Inventory
Median listing prices peaked at $520,000 in May but declined to $489,990 by November, indicating a mid-year high followed by market cooling. Active listings grew steadily (from 18,063 to 25,218), while pending listings peaked in April (13,918) and declined later, reflecting reduced buyer activity.
Homes sold faster in early 2024 (low of 50 days in March) but stabilized at 58 days by year-end. Price reductions increased throughout the year, peaking in October, signaling oversupply or slowing demand. Strong market activity in early 2024 gave way to slower sales and price adjustments later.
Mortgage Rate
Mortgage costs in Arizona remain high. As of January, the monthly payment on an average-priced home would be $2,165. But the Mortgage rate for 30 years term loans are declining in 2024. It stands at 6.60% at December 2024.
Source: FRED Economic Data
Property Tax
Arizona’s average property tax rate is around 0.51% in 2024 and it was 0.63% in 2023, well below the national average of 0.99%. Arizona’s average combined state and local tax bill is around $1,707 per year, which is $1,088 less than nationwide rates.
Source: Tax Foundation
Key Challenges
- High House Price-to-Income Ratio: The disparity between house prices and incomes limits homeownership opportunities for middle- and low-income households.
- Declining Median Income: The decrease in household income from 2023 to 2024 exacerbates affordability challenges, as purchasing power diminishes while housing costs remain high.
- Low Housing Inventory: Permitting activity in Arizona is slow resulting in low housing inventory.
- Rising Financing Costs: Higher mortgage rates compound the affordability issue, increasing the overall cost of homeownership.
These trends highlight the ongoing challenges for prospective homebuyers, as housing prices continue to rise faster than income growth.
Housing Affordability in 2025
- Home sales will rebound next year, prices will rise at a slower pace, and metro areas like Boston; Phoenix, and Grand Rapids, Mich., are poised to be some of the hottest housing markets. These are some of the forecasts for 2025 from the National Association of Realtors (NAR).
- Trump’s proposals to deregulate home construction and open federal land could help homebuilders expand inventory and lower prices.
- Though Mortgage rate is dropping but not significantly. It will stabilize approximately at 6% for 30 years term loan.
- Housing inventory will grow but still will be below the demand according to National Association of Realtors (NAR).
- Home prices are expected to grow by 3.7% in Arizona according to the Naroda Real Estate Investments. Population growth, especially in areas like Phoenix, continues to drive demand.
Given the complexities of the current housing market, it’s wise to rely on the expertise of an experienced local real estate agent, such as Az Flat Fee in Arizona. If you’re planning to enter the market in 2025, whether as a buyer or seller, partnering with a professional can help you navigate the challenges and make informed decisions. Let the experts guide you to success.
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Analysis Assumptions in this report
- Monthly Loan Payment:
- Down Payment is 20%.
- Mortgage Period is 30 years
- Monthly Income Required:
- Debt To Income (DTI) ratio is 30% of the median income
