
There is a mix of factors that typically shape housing market trends. Four of the main influences impacting changes in the market include:
- Government policies
- Supply and demand
- Speculation and expectation
- International transactions
Any one of these factors can cause or contribute to long and short-term fluctuations in the market, while a combination of factors working together bring about trends. Even though they are categorically different from one another, these factors are closely linked.
The impact of government policy
Government policies can have significant influence on changes in the financial markets, which, in turn, impact the housing market. An increase or decrease in interest rates by the Federal Reserve has the power to slow or speed up growth. When interest rates are low, it can increase opportunities for potential buyers and builders, spurring an increase in market activity. If interest rates increase and borrowing becomes more expensive, both building and buying can slow. Other government policies, programs and regulations have influence on decisions to build new homes. In the past few months, we’ve seen interest rates begin to come down. Yet due to other market factors, buyers are not rushing to come off the sidelines and builders are moving forward thoughtfully.
The ups and downs of supply and demand
The demand for single-family homes in Arizona has remained steady for the past year. Population growth continues to increase and the inventory of homes remains limited. Recent estimates from the U.S. Census Bureau show that more than 256,000 people moved to Arizona in 2023, with the 2024 numbers not yet confirmed. According to stats on Redfin, home sales in 2024 increased by almost 18 percent and the number of listings rose by approximately 20 percent. While Nevada has a shortage of affordable housing, figures from December 2024 reported an increase in inventory with more than 13,000 homes for sale in the state.
Speculation and expectation
Investors, consumers and politicians typically have differing opinions on the economic landscape and that influences how they act. Sentiment indicators, which are market psychology-based indicators, are typically used to assess how particular groups feel about the current economy. The analysis of these indicators alongside other factors can cause an expectation or bias of future economic trends and future pricing. According to the economic index research published by Rich States, Poor States examining economic growth – Arizona ranks third in the U.S. for economic outlook and Nevada thirteenth.
The pros and cons of international transactions
The strength of a country’s economy is commonly measured by its flow of funds between other countries. Put more simply, the amount of money leaving the country weakens the economy and currency. This money can be seen to strengthen or stimulate the economy within those other countries. In recent years, foreign investment in residential real estate in the U.S. as a whole has declined. However, it continues to increase in Arizona and Nevada. Reasons for the decline can be attributed to higher prices and a strong dollar, but the growth and appeal of the Southwest markets are still attracting foreign buyers.
Evaluating the market in both states and the outlook for 2025, we see cross-over in terms of pricing, interest rates and affordability.
Here are some of the top predictions for the 2025 housing market in both Arizona and Nevada:
- Price growth – Following years of rapid price increases, home prices in Arizona and Nevada are likely to stabilize in 2025 with perhaps a modest rise at a slower pace. The housing market in Nevada has typically been more volatile in comparison to Arizona but 2025 is pointing to a more balanced market. In Arizona, the demand for homes remains high, particularly in the Phoenix metro area and Tucson.
- Population growth – As previously mentioned, the population growth in Arizona remains steady with people moving to the state daily. The state’s favorable climate and cost of living makes the demand for single-family homes a growing trend. Nevada, Reno and Las Vegas continue to see population growth too; also driven by the influx of movement from other states.
- Shortage of affordable housing – Like Nevada, Arizona is also struggling with an affordable housing shortage. This push could spur development in urban and suburban areas for more affordable housing options.
- Interest rates and home affordability – The market is closely linked to interest rates and all signs suggest that mortgage rates are anticipated to stay relatively high this year, which has a knock-on effect on affordability. However, this has motivated some buyers to adopt a carpe diem-type attitude and act before rates get any higher.
- Short-term rental market impact – Tourist-heavy regions such as Las Vegas and Scottsdale have experienced demand for short-term rentals. This trend could further shape the housing market in these specific areas with developers and investors putting their focus on rental properties and vacation homes. The general rental market in Las Vegas is competitive as population numbers continue to increase there too. While rents can rise, it will be at a slower pace than seen in the pandemic.
- Sustainability – The interest in energy-efficient homes has piqued most recently due to rising costs and Arizona’s hot climate is a perfect environment for solar power. The 2025 buyer is someone that is more environmentally conscious and green features like solar make the housing market in the state more appealing. Newer suburban communities in Henderson, NV, not far from Las Vegas are also adopting more sustainable homebuilding practices, particularly as the climates are both very similar.
What does the future hold for the Southwest?
All signs suggest that the Arizona and Nevada housing markets will experience reasonable growth this year. The demand for homes will likely remain solid due to many factors, including lifestyle preferences and population growth.
At Landmark Title, our team of residential escrow officers in Arizona and Nevada has seen many factors and trends shape both states’ housing markets. If you are considering purchasing a home in 2025 and would like to work with an escrow and title company that is focused on delivering a secure and seamless closing process, get in touch here. We work closely with realtors in Arizona and Nevada and deliver a solution-driven personalized approach to our shared clients.