Arizona Housing Bubble Watch

If you follow our blog, then you will know that I regularly take a look at three market indicators that I believe are great signals of a looming housing bubble. We are all still shaking in our boots a little bit from the last market crash, and I want to be sure that we are ready next time there is a bubble. Here are the latest readings on three key indicators.

Housing Bubble Signal #1: Delinquencies

This is simply a measurement of how many homes are behind on their mortgage. At the peak of the mortgage crisis, more than 16% of AZ homeowners were at least one month behind on their mortgage. New, tight mortgage guidelines appear to be doing their jobs–now, less than 4% of AZ homeowners are behind. This is a great sign of a healthy housing economy!

Housing Bubble Signal #2: Rent Cost Vs Purchase Cost

Leading up to the Great Recession, the monthly cost of owning a home in AZ became significantly higher than the cost of renting that same home. In our market, this is a bad sign. Generally speaking, those two costs should be pretty similar. The latest numbers are as follows:

Avg monthly cost of ownership – 281k home with 20% down payment = apx $1,400

Avg monthly cost of renting – $1,550

This is another great sign that the Metro Phoenix area has room to run in terms of pricing before it becomes cheaper to rent than it is to buy.

Housing Bubble Signal #3: Affordability

The last key metric we focus on is affordability. This measures how affordable the average home payment is compared to the average monthly income in our area. As stated above, the apx monthly home payment for a home selling at our average sale price is $1,400. The average pay in Metro Phoenix is currently $60,000, yielding a $5,000 a month income. Ideally, we want the avg monthly payment to be 25% of the avg monthly income, which would be $5,000*25%= $1,250. So, for this measurement, we are slightly less affordable than we would like to be–but still well within the normal range.


Housing bubble prediction is notoriously hard to do, but we can safely say that the factors that caused the last bubble are not a current concern. The AZ housing market is super strong and stable for the moment. Subscribe to our blog to keep abreast of the latest market updates, which we publish regularly.

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