Forecast: Phoenix Home Prices to Keep Rising Into 2018

According to a recent forecast from the real estate data company Zillow, the Phoenix housing market could continue appreciating well into the first part of 2018.

But homeowners in the areas probably shouldn’t expect the kind of home-price appreciation seen over the last year. House values in the Phoenix appear to be rising more slowly in 2017 than they did in 2016.

Phoenix Housing Forecast: Prices Rising Through March 2018

As of March 2017, the median home price in Phoenix, Arizona was just over $200,000 — and rising. The housing economists at Zillow predicted in March that the median home price in Phoenix would rise by 3.5% over the next 12 months (through March 2018). That’s roughly equivalent to the national average for annual housing appreciation going back decades.

As Zillow stated in March: “Phoenix home values have gone up 9.4% over the past year and Zillow predicts they will rise 3.5% within the next year.”

Phoenix homeowners might consider this relatively low forecast a negative sign, but it’s actually a positive. Above-average price increases are generally not sustainable over the long term, especially when they far exceed wage and income growth. Under such conditions, housing markets become unaffordable to an increasing number of residents.

An ‘Overheated’ Real Estate Market?

A February 2017 report by Fitch Ratings suggested that the Phoenix real estate market was “overheated.” According to the report: “home price growth in parts of the western U.S. … is exceeding supporting economic fundamentals. Of particular focus for Fitch are home prices in major metro areas like Dallas, Las Vegas, Phoenix and Portland, which are overpriced by 10% – 14%.”

Related: Marketing for Phoenix real estate agents

Granted, Phoenix is still relatively affordable compared to a lot of other big cities across the country. In fact, the city was recently ranked #7 on a top-ten list of most affordable big cities for U.S. home buyers, by the mortgage information website HSH.com.

Still, the more moderate forecast for Phoenix’s housing market, extending through 2017 and into 2018, is a good sign. It suggests a return to normalcy after years of tumultuous fluctuations. It’s a more sustainable pace for home-price appreciation.

Study: Buyers Need $46,000 to Afford a Median-Priced Home

According to HSH.com, buyers would need to earn around $46,000 per year to afford a median-priced home in Phoenix, Arizona. That’s with a down payment of 20%. If a home buyer puts down 10%, the salary needed to buy a home would increase to around $54,000.

Like home prices, mortgage rates have also risen over the last year or so. On March 9, 2017, Freddie Mac reported that the average rate for a 30-year fixed-rate mortgage loan was 4.21%. That’s up from 3.68% the same time last year. So Phoenix home buyers are currently paying more for houses and for mortgage loans, compared to a year ago.

The bottom line: Forecasts for the Phoenix real estate market suggest that home prices will continue rising throughout 2017 and into the first part of 2018, but at a slower pace compared to last year. According to some economists, this is a much-needed change that could prevent the Phoenix housing market from becoming too “overheated.”

Disclaimer: This story includes housing market and home price forecasts for Phoenix, Arizona, through 2017 and into 2018. These forward-looking statements were provided by third parties not associated with our company. The Home Buying Institute (HBI) makes no claims or assertions regarding future housing conditions.