Phoenix’s explosive population growth is testing infrastructure capacity and pushing housing affordability to critical levels, creating mounting challenges for builders despite strong underlying demand fundamentals.
According to Zonda Economics’ latest analysis, Phoenix faces what developers describe as a “deadlock”: utilities, water, and transportation systems must be in place before permits can be issued, yet municipalities cannot fund or build them quickly enough due to long procurement, bonding, and planning cycles.
“Large, centralized water and sanitation projects are especially slow-moving, constrained by complex permitting cycles that often stretch over several years,” says Ali Wolf, Zonda’s chief economist. “Development timelines have lengthened, driving up costs and adding uncertainty.”
Water Rights Challenge
Water access has become a critical constraint. Recent headlines underscore growing concerns: “Lawsuit questions if Arizona city has enough groundwater for large housing development”; “At Phoenix’s Far Edge, a Housing Boom Grasps for Water”; and “Arizona groundwater policies largely close door to new housing in fast-growing Buckeye.”
While Phoenix’s population grew 1.6% over the past year, adding nearly 85,000 residents, infrastructure required to support that growth has lagged behind.
Affordability Crisis Deepens
Phoenix is grappling with affordability challenges that have sidelined many local buyers. Since 2019, average incomes have grown 27.5%, while new home prices increased 40% and resale prices surged 65%.
Much of this price growth has been fueled by newcomers from higher-cost markets like Los Angeles and San Francisco. While this supported sales volumes, it priced out local buyers and contributed to supply buildup.
Phoenix led the nation in quick move-ins per community at 4.8 in September, far outpacing the U.S. average of 2.6. Ninety percent of Phoenix builders now publicly offer incentives on QMIs—the seventh-highest share among Zonda’s top markets.
“The affordability gap has sidelined many local buyers and contributed to a buildup of new home supply,” Wolf notes. “The combination of incentive usage and selective price cuts has resulted in meaningful margin compression.”
Since 2019, Phoenix’s Consumer Price Index climbed 31.8%, compared with 26.3% nationally. Local inflation is running 21.9% above its 10-year average, compared with 18.4% nationally, while wage growth rose just 20.2% above its 10-year average.
Resale Competition Intensifies
Active resale listings have exceeded pre-pandemic levels every month of 2025 except January and February. September’s reading was the highest since data collection began in 2017. Higher inventory has extended sell times by 16% year-over-year to 65 days.
“For builders, the current supply environment means a shift from scarcity to competition,” Wolf observes. “Sales of new homes have already required deeper incentives and price cuts, and we expect that trend to continue.”
Structural Fundamentals Intact
Despite headwinds, Phoenix’s structural fundamentals support long-term demand. The metro’s Millennial population grew 8.9% from 2020 to 2024, while Baby Boomers increased 10.8%. Cancellations remain contained at 9.6% of total contracts, compared to nearly 70% during the 2022 slowdown.
“Phoenix’s housing market has slowed cyclically as buyers navigate affordability constraints,” Wolf concludes. “Structurally, however, population gains and a diversifying economy continue to support market resilience.”
The insights in this article were taken from more in-depth research reports published in Zonda’s National Outlook subscription.
