The Valley of the Sun Housing Market Grind

By Rob Jafek | Principal of Boomerang Capital

The Phoenix housing market is in a “grind”—slow, uneven, and offeringlimitedsense of forward movement. But this is a normal part of the region’s long-standing cycle. For more than forty years, Phoenix has followed a consistent pattern: long expansions followed by shorter cooling periods. Prices rose through the eighties and nineties, surged in the early 2000s, collapsed during thefinancial crisis, recovered steadily through the 2010s, and then jumped sharply during the pandemic. The cooling phase that began in mid-2022 aligns withpreviouscorrections and is nowhere near the severity of 2008.

Phoenix’s housing cycle typically spans about eighteen years: a long expansion, a two-to-four-year correction, and a recovery that sets the stage for the next boom. The market is more volatile than most because population growth, available land, and affordability pressures amplify each turn. When interest rates fall or migrationincreases, construction and prices climb quickly; when rates rise or job growth slows, both cool just as fast. After the long expansion from 2012–2022, Phoenix entered a typical correction—prices slightly off peak, transactions down, and inventory higher—but supported by stronger lending standards and significant homeowner equity.

In this environment,renovationhas become one of the most reliable opportunities. Millions of homeowners are locked intovery lowmortgage rates and are reluctant to move, pushing demand toward improving existing homes instead of selling. Builders are alsoslowingactivity due to elevated financing costs and cautious buyers. This combination shifts more demand to renovation and value-add projects. For investors, remodeling allows smaller, controlled investments while waiting for larger opportunities toemerge. Updated homesremainin demand, and the supply of move-in-ready inventoryremainslimited.

The grind has also revived interest in the BRRR strategy. With rapid appreciation off the table, investors are returning to value creation through rehab and long-term holds. If interest rates fall as expected, completed projects can be refinanced at better terms while rents stay solid, supported by a shortage of updated rental homes. This strategy requires disciplined execution—conservative valuations, thoughtful rehab, and long-term planning. Meanwhile, the short-term rental marketremainssoft due to increased regulation, higher operating costs, and oversupply.

Different partsof the metro are experiencing the cycle indifferent ways. High-end areas—Paradise Valley, Arcadia, Biltmore, and Scottsdale—are slowing but not declining sharply because buyers are less rate-sensitive and often pay with substantial cash. The East Valley—Tempe, Chandler, Gilbert, and strong areas of Mesa—remainsresilient thanks to stable demand tied to jobs and schools. Central infill neighborhoods neardowntownand the historic districts behave like defensive assets, supported by older housing stock, limited supply, and long-term desirability.

Overall, Phoenix is moving through a normal correction, not a crisis. Prime neighborhoods are slowing, central infill areasremainstrong, inner suburbs require careful underwriting, and far-out exurbs carry the most risk. The market willlikely movesideways, stabilize, and eventually return to growth as interestratesease and migration strengthens. For investors and lenders, the best opportunities lie in choosing the right submarkets and leaning intohome flippingfor steadier returns.