By Matthew Holloway |
Arizona’s housing market continues to face significant affordability challenges despite slowing home prices and rising inventory levels, according to an update released this week by the Common Sense Institute (CSI) Arizona.
The report estimates Arizona faced an immediate housing shortfall of 55,992 units in 2025, while the state’s cumulative long-term housing deficit has reached approximately 110,837 units. According to CSI, current residential permitting trends suggest it could take more than a century to eliminate the existing housing gap.
CSI reported Arizona issued 50,983 residential permits in 2025, representing a 14 percent decline from 2024 and the slowest pace of permitting activity since 2019. The organization concluded that slowing construction activity continues to constrain the state’s housing supply, despite weakening demand in some markets.
“Arizona’s housing market is no longer experiencing the rapid price growth seen during the pandemic-era boom, but affordability challenges remain deeply embedded in the market,” said Glenn Farley, Director of Policy and Research at Common Sense Institute Arizona. “The state continues to face significant supply constraints, and while softer demand has created some short-term relief for buyers, long-term progress will ultimately depend on a sustained increase in housing production and permitting activity.”
According to the report, Arizona’s housing market has become more favorable for buyers in the short term as inventory levels rise and price growth slows. However, CSI stated the shift reflects softer buyer demand rather than substantial improvements in housing availability.
Average home prices in Arizona declined approximately 2.9 percent in 2025, though CSI noted prices remain roughly 11.1 percent above pre-pandemic trends. The report estimated the average home price statewide at approximately $420,900.
Mortgage affordability also remains under pressure. CSI estimated that a household would need an annual income of approximately $87,000 to afford the average-priced home in Arizona under conventional underwriting standards.
The organization found Arizona households now require roughly 58 hours of work per month at the average wage to service a standard mortgage payment, compared to approximately 38 hours per month in 2019. CSI estimated only 42 percent of Arizona households can currently afford the monthly mortgage payment on an average-priced home without exceeding standard debt-to-income guidelines. In 2019, approximately 66 percent of households met that threshold.
CSI also reported that Arizona home prices have declined approximately 3.4 percent statewide since June 2024, representing the third-fastest rate of decline nationally during that period.
It assigned Arizona a preliminary “C-” Housing Report Card grade for 2025, down from a “C+” at the end of 2024. The report follows CSI’s earlier affordability rankings that identified Arizona among the least affordable states in the country based on housing costs relative to household income.
Farley and CSI Arizona Senior Economist & Research Analyst Zachary Milne, who co-authored the report, concluded, “Arizona’s market is healthier than it was but remains paralyzed by inefficiencies. Prices have stopped rising but also haven’t come down much off their all-time highs. Combined with high interest rates, entering the housing market remains a daunting task for any prospective new buyer. Home permitting is slowing, migration and household formation are down, and the state is losing its luster as an affordable place to move to and create a life.”
Matthew Holloway is a senior reporter for AZ Free News. Follow him on X for his latest stories, or email tips to Matthew@azfreenews.com.
