Phoenix Housing Market Cools as Population Declines

A Surprising Reversal After Years of Growth

For the first time in over a decade, Phoenix is experiencing something unprecedented: people are actually leaving. In Maricopa County, net domestic migration fell from 32.6k in 2022 to -1.8k in 2024, reversing thirteen years of consistent population gains. This isn’t just a minor dip—it’s a complete reversal of what made Phoenix one of America’s hottest housing markets. The city that once symbolized endless growth and opportunity is now watching its population shrink, and the ripple effects are hitting the housing market hard.

What makes this shift particularly striking is how sudden it happened. Home price growth in Maricopa County has slowed significantly, with year-over-year appreciation dropping to -0.4% in 2025, marking a sharp reversal from the 16.0% surge seen in 2022. This represents the kind of dramatic turnaround that real estate professionals haven’t seen since the Great Recession.

The Numbers Don’t Lie: Population Loss Becomes Reality

The statistics paint a clear picture of Phoenix’s demographic shift. Phoenix is officially losing people, marking a major demographic shift between 2022 and 2025, with net domestic migration in Maricopa County falling from positive 32.6k to negative 1.8k. This represents a swing of over 34,000 people annually—enough to fill a small city.

Interestingly, while domestic migration has turned negative, Metro Phoenix’s population grew by nearly 85,000 people between 2023 and 2024. However, this growth is now entirely dependent on international migration. International migration drove the majority of growth for Maricopa County last year, with the U.S. Census Bureau noting that without a net increase in migration, the falling birth rate and exodus of domestic residents would have led the biggest counties to see flat or falling numbers.

The shift is particularly pronounced when looking at tax return data. The counties receiving the most net domestic migration from other states were Maricopa, Pinal, and Mohave, with 18,884, 4,957, and 4,405 new residents, respectively. While these numbers might seem positive, they represent a significant decline from previous years.

Housing Inventory Explodes as Demand Softens

Phoenix’s housing market is experiencing an inventory boom that would have been unthinkable just a few years ago. Active listings in Maricopa County have risen sharply, climbing to 14,767 in early 2025, up from 9,980 in 2024 and nearly quadruple the pandemic low of 3,330 in 2022. This dramatic increase in available homes is fundamentally changing the market dynamics.

Phoenix has experienced steady inventory growth over the past year, with the total number of active real estate listings growing by nearly 39% from January 2024 to January 2025. For buyers who spent years competing in bidding wars, this represents a complete reversal of fortune.

The psychological impact on the market is profound. With housing inventory in the Phoenix metro area at its highest levels in about a decade, some real estate experts are warning of potential market instability. What’s particularly noteworthy is that Days of Inventory (DOI) has climbed to 106.7, up from the long-term average of 94, and if DOI crosses 140, buyer leverage will significantly increase across nearly all segments.

Price Cuts Become the New Normal

One of the most visible signs of the market’s cooling is the prevalence of price reductions. Phoenix’s price cut percentage increased to 37.3% in 2025, rebounding from 32.3% in 2024. This means more than one in three homes for sale has had to reduce its asking price—a clear sign that sellers are struggling to find buyers at their original price points.

The trend is even more striking when compared to the pandemic boom. During the pandemic, price cuts dropped to 28.5% in 2020 and fell further to 10.4% in 2021, but post-pandemic, price cuts remained low at 9.8% in 2022 but spiked to 41.2% in 2023 as rising mortgage rates reduced affordability.

Phoenix metro area had the highest percentage of price reductions among the nation’s 50 largest metro areas, with 25% of listings experiencing price cuts. This statistic alone demonstrates how dramatically the market has shifted from the seller’s paradise of just a few years ago.

Home Prices Finally Start Declining

After years of relentless increases, Phoenix home prices are finally showing signs of weakness. Since peaking in mid-2022, when values were around $468,200, prices have edged slightly lower, now resting at $466,900, representing a modest decline of about 0.3%. While this drop might seem small, it represents a significant psychological shift in a market accustomed to constant appreciation.

In May 2025, Phoenix home prices were down 2.9% compared to last year, selling for a median price of $450K, with homes taking 53 days to sell compared to 46 days last year. The fact that homes are sitting on the market longer while prices decline demonstrates the fundamental shift in market dynamics.

Perhaps most telling is the rapid pace of recent price declines. In just the past month, average closed sale prices per square foot dropped from $316.01 to $302.40—a 4.3% decline—while median sales prices slid from $465,000 to $445,000 in just five weeks. This kind of rapid price movement suggests the market is undergoing a significant correction.

The Luxury Market Leads the Downturn

High-end properties are experiencing the most dramatic cooling. Several forces are reshaping the local housing landscape, including luxury market slowdowns, with $1M+ contracts dropping for six weeks straight and rising inventory outpacing steady buyer demand. This luxury market weakness is significant because high-end sales often drive overall market statistics.

The luxury market was particularly exuberant between 2024 and 2025, keeping prices elevated, but more recently, with stock market fluctuations and some volatility and uncertainty, luxury buyers have taken a pause. This pause in luxury buying is creating a ripple effect throughout the entire market.

The impact on market averages is notable. At the same time, there was a boost in sales under $500,000, creating a market share shift in the data set that became more bottom-heavy and pulled averages down. This shift demonstrates how the luxury market’s cooling is affecting overall price statistics.

Buyers Finally Gain Negotiating Power

For the first time in years, Phoenix home buyers are finding themselves in a position of strength. Sellers are receiving, on average, 97.7% of their final list price, compared to 97.9% a year ago, and concessions are rising fast, with real negotiation back and buyers having leverage.

Buyer activity is steady, especially in the $250K–$500K price range, with FHA loan applications up 6% nationally, and homes priced between $300K–$400K are closing at 99% of list, with buyers typically negotiating ~$6,300 off list plus $10K+ in seller-paid closing costs on a $450K home.

The Market Index now sits at 77, well within buyer’s market territory, with inventory rising and demand holding steady but not accelerating. This represents a fundamental shift from the extreme seller’s market that characterized Phoenix for over a decade.

Economic Factors Drive the Cooling

The Phoenix market’s cooling isn’t happening in isolation—it’s driven by broader economic factors. As of early March 2025, the average 30-year fixed mortgage rate is around 6.63%, which is significantly higher than the rates seen a few years ago, making it cost more to borrow money to buy a home.

Home price growth has turned negative at -0.4% year-over-year, with inventory rising and demand weakening due to reduced migration and higher mortgage rates, with home prices dropping primarily due to a sharp decline in domestic migration and increasing housing supply.

The combination of higher borrowing costs and reduced population growth is creating a perfect storm for the housing market. With fewer buyers entering the market and active listings rising to over 14,700 in 2025, sellers are cutting prices to stay competitive, though home values remain over 50% higher than in 2019.

Market Forecasts Point to Continued Softness

Real estate analysts are predicting continued challenges for the Phoenix market. According to Reventure App’s latest Home Price Forecast, Maricopa County scored 38 out of 100 for 2025, which is significantly below the stability threshold of 45, indicating weakening conditions in Phoenix.

As a result, buyer demand has reduced, the number of sellers has increased, and price cuts are becoming more common, all pointing toward future home price declines, with Phoenix seeing signs of a housing correction in 2025.

However, not all experts are predicting a complete collapse. While no one can predict future real estate trends with complete accuracy, it’s highly unlikely that the Phoenix area will see a market crash anytime soon, though the market is experiencing a reality check.

The Road Ahead: What This Means for Phoenix

The Phoenix housing market is undergoing its most significant transformation in over a decade. Unless migration continues to decline and supply increases further, affordability may improve slightly but is unlikely to return to pre-pandemic levels in 2025, with Phoenix’s once red-hot housing market cooling and putting downward pressure on future home prices.

As of Q1 2025, the Phoenix housing market remains stable, with moderate appreciation and increased buyer flexibility compared to the aggressive pace seen during the pandemic years, with home values continuing to trend upward, supported by population growth, limited inventory, and sustained demand in key neighborhoods.

The city’s fundamental strengths—job growth, climate, and relative affordability compared to coastal markets—haven’t disappeared overnight. But the era of unlimited growth and soaring prices appears to be over. For buyers, this represents the best opportunity in years to find a home without facing intense competition. For sellers, it’s time to adjust expectations and price realistically.

The Phoenix housing market’s cooling after years of explosive growth represents a return to more normal market conditions, but the transition period is proving challenging for everyone involved. Whether this cooling becomes a crash or simply a healthy correction will depend largely on whether the population decline continues and how quickly the market can absorb the current inventory surge.