Jan 9, 2023 - Real Estate

Phoenix condo prices are falling faster than in other parts of the country

Illustration of a real estate sale sign shaped like a downward point arrow

Illustration: Annelise Capossela/Axios

Condo prices in Phoenix's largest suburbs dropped more than single-family home prices last year, bucking the trend seen in most other major metro areas.

What's happening: Home prices have cooled off since the Federal Reserve began raising interest rates early last year.

  • New data from real estate researcher Point2 show that condo prices in Glendale dropped 21% between May and October last year and Mesa condo prices dropped 15%.
  • Single-family home prices in these cities dropped 7% and 8%, respectively.
  • Glendale's condo decrease was the fifth steepest in the country.

Zoom out: Nationwide, condo prices decreased in 65 of the 100 largest cities, while single-family home prices fell in 88 markets, according to Point2.

  • But in Arizona, condo prices fell in all seven of our largest cities.

What's happening: Andra Hopulele of Point2 tells Axios Phoenix that the discrepancy is likely the result of many people moving to the Valley who are looking for larger homes with yards, which is still an affordable option here compared with many other large cities.

  • This has created greater demand for single-family homes over condos, even with fewer people currently buying homes, she says.

State of play: Doug Ressler of commercial real estate research firm Yardi Matrix says condos here also have to compete with a growing number of condo-like rentals, which have become more appealing as home prices and interest rates have increased.

  • Ressler says several new build-to-rent communities have come online in the last few years, especially in suburban parts of Phoenix. These look like townhomes or small single-family home neighborhoods, but are entirely rentals.
  • Young professionals and families are increasingly turning to this option because they still feel more homey than an apartment, but don't require a down payment.

Of note: Local Homie real estate agent Heather Morales tells us she views the price drop as a market correction.

  • When prices were surging during the pandemic, condos gained popularity because they were all many people could afford. That raised their prices beyond their traditional value.
  • Now that single-family home prices have come down, condos have lost their luster to some buyers.

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