By Jonathan Eberle |

A new report from the Common Sense Institute (CSI) signals that Arizona’s housing market may be headed for deeper trouble, even as homebuyers enjoy a short-term dip in prices. The think tank’s second-quarter analysis shows that slowing permitting activity is threatening to exacerbate the state’s chronic housing shortage.

In Greater Phoenix, average home prices declined by 1.0% in the first quarter of 2025 and are now down nearly 7% from their July 2022 peak. However, experts warn the modest drop masks deeper affordability challenges. The average Arizona home is still more than 50% more expensive than it was in 2019, and monthly mortgage payments have more than doubled during that time.

“We’re seeing some surface-level relief in pricing, but the fundamentals of the market still point to serious long-term issues,” said Zachary Milne, Senior Economist and Research Analyst at CSI. “Without an increase in new housing supply, prices are likely to rebound—and affordability will remain out of reach for many.”

While the current increase in for-sale inventory is helping to cool the market slightly, CSI analysts caution that these effects may be fleeting. Without local reforms to streamline permitting or reduce regulatory burdens, housing supply will continue to lag demand—keeping pressure on prices and limiting options for would-be homeowners.

“The bottom line is that Arizona is not building fast enough to keep up,” Milne added. “Unless that changes, the state’s affordability problem will only get worse.”

As policymakers and local leaders grapple with how to address Arizona’s housing needs, the latest data underscores a growing consensus: the state’s structural housing shortage is not going away anytime soon—and relief for buyers may prove temporary.

Jonathan Eberle is a reporter for AZ Free News. You can send him news tips using this link.