Arizona’s Economy Faces Turbulence: What It Means for You

By Jeff Hernandez, Realtor & Attorney — The Connie Colla Group at RETSY

When I first moved to Arizona in 1989 to attend law school, Phoenix was a place with huge potential and lots of room for growth. Scottsdale’s quiet sophistication hinted at what was to come. Fast forward more than 30 years, and we’ve built one of the country’s most dynamic economies—rooted in innovation, real estate, healthcare, and a growing luxury lifestyle market.

But in 2024 and early 2025, Arizona’s economic engine started to sputter just a little.

The term “turbulence” has crept into headlines, echoing in coffee shop conversations and investment meetings alike. And as someone who straddles both the legal and real estate arenas, I want to offer a grounded, practical view—not just stats, but perspective.

Let’s talk about what’s happening, why it matters, and how it may affect you—whether you’re buying a home, managing a business, or watching Arizona’s next chapter unfold.

Arizona’s Boom Years: A Quick Look Back

We can’t talk about turbulence without understanding the climb.

Post-pandemic, Arizona rebounded faster than many states. New residents flooded in, drawn by affordability (at the time), jobs, and sunshine. Entire neighborhoods sprang up seemingly overnight. Businesses—especially in tech and healthcare—found a welcoming environment.

From 2020 to 2022, our GDP soared. Phoenix consistently ranked among the fastest-growing metros in the nation. We added jobs. We built homes. We expanded transit, infrastructure, and medical facilities.

But like any economy, there’s always an inflection point.

So, What’s the Turbulence?

It’s not a crash. It’s not a recession. But there are headwinds.

Job Growth Has Slowed

After years of brisk expansion, job growth has tapered. The Arizona Office of Economic Opportunity originally forecasted a 2.1% job growth rate for 2024. That was revised down to about 1.3%. It's still growing—but at a slower pace.

Some sectors, like healthcare and hospitality, continue to add jobs. But others—construction, manufacturing, and professional services—have seen cutbacks or flatlines. In February 2025 alone, Arizona saw a slight job contraction, particularly in those higher-skill sectors that typically lead economic expansions.

Forecasted Vs. Revised Job Growth (AZ, 2022–2024)

Labor Market Revisions

One big shock came when employment numbers from 2023 were revised significantly downward. Overnight, we went from “solid growth” to “slightly behind the national average.” That caused a ripple effect—consumer confidence dipped, and forecasts became more conservative.

How Job Revisions Affect Forecasts

• Investor Caution: Revised employment numbers often lead investors to delay or scale down development projects due to decreased confidence in short-term demand.
• Hiring Freezes: Businesses, especially in construction and tech, may pause hiring or expansion plans to reassess budgets and market signals.
• Policy Reevaluation: Government agencies and economic councils use these numbers to allocate funds. A downward revision may mean scaled-back infrastructure or incentive plans.
• Lowered GDP and Growth Forecasts: Analysts use job data to forecast GDP. Revised numbers often trigger a domino effect in economic modeling and public messaging.
• Strategic Repositioning: Developers and real estate professionals adjust timelines, pricing strategies, and project scopes to reflect new demand realities.
• Media Narrative Shift: Media and public perception change quickly when revisions hit headlines, often reducing consumer confidence in the broader economy.

Unemployment Remains Manageable

Despite concerns, the unemployment rate remains reasonable—hovering around 4.1% in April 2025. That’s close to the national average. However, underemployment—people working part-time or in roles below their qualifications—has crept up.

What’s Driving the Shift?

Real Estate Cooldown

Housing was white-hot between 2020 and 2022. We saw record-breaking appreciation, bidding wars, and sight-unseen purchases.

Now? It’s leveled out. Prices in luxury markets like Paradise Valley and Arcadia are holding strong, but broader affordability concerns have cooled demand in mid-tier suburbs. Interest rate volatility hasn’t helped either.

But here’s the nuance: a cooler real estate market doesn’t mean weakness. It often signals balance. The feeding frenzy is over—but serious, qualified buyers are still here. In fact, I’m seeing more discerning clients and thoughtful purchases, especially in the $1M+ category.

2021 vs. 2025 Home Sales Comparison: Luxury vs. Mid-Tier

Tourism Takes a Hit

Arizona's tourism economy—especially in the winter months—relies heavily on Canadian snowbirds and international visitors. In 2025, unfavorable exchange rates, a tumultuous political climate, and shifting travel habits have dented that inflow.

Some experts estimate this seasonal drop could lead to a $2 billion loss in tourism-driven revenue statewide.

When you walk through Old Town or Sedona and see a few more empty tables or slower gallery sales, this is the root cause.

The Metro Advantage: How Phoenix and Scottsdale Stand Apart

The broader state may feel the pinch—but not every area is affected equally.

Greater Phoenix, particularly Scottsdale, continues to outperform. Why?

• Diversified economy: With healthcare, finance, education, and real estate all contributing.
• Population growth: People are still moving here. Arizona ranked among the top 5 for net migration in 2024.
• High-income buyer activity: The luxury market remains resilient. Homes priced over $2 million are still selling—though buyers expect more value and negotiation room.

What the Experts Say: The Forecast Ahead

I follow the forecasts closely—not just as a Realtor, but as a strategist.

Here’s what institutions like the UofA's Eller College of Management and Comerica Bank are projecting:

• Arizona’s GDP: Expected to grow 2.8% in 2025, slightly above the national forecast of 2.7%. Not explosive—but healthy.
• Employment outlook: Slower growth expected through mid-2025, with a modest rebound in early 2026.
• Sectors to watch: Renewable energy, healthcare, tech, and advanced manufacturing. These are the industries likely to pull us forward.

In other words, the turbulence may persist a bit longer—but Arizona remains on a fundamentally strong path.

How This Affects You

Whether you’re a homeowner, investor, or buyer considering your next move, here’s how to think about all this:

1. For Buyers

If you’ve been on the fence, this may be your moment. The frenzy has cooled. Negotiations are back. Sellers are more flexible. You have room to make strategic decisions and there are more choices as inventory increases.

2. For Sellers

You can still command strong value—especially if your home is well-presented and priced right. However, be prepared: buyers are scrutinizing the condition, upgrades, and community amenities closely, and many buyers expect seller concessions from the outset of negotiations.

3. For Investors

Rents are holding steady in the Phoenix metro, and demand for quality housing isn’t going anywhere. Focus on areas with job growth and infrastructure plans—Tempe, Queen Creek, Peoria, Surprise, and parts of North Phoenix are worth a look.

Arizona’s Long Game: Beyond the Noise

Arizona has always been a long-game state.

We’ve weathered booms and busts before. What makes this moment different is our foundation: an educated workforce, improving infrastructure, and a balanced economy. We are no longer a town based mainly on tourism and construction.  From the biosciences corridor in downtown Phoenix to billion-dollar chip manufacturing investments, we're laying tracks for growth.

That’s the mindset that defines Arizona.

Final Thoughts

Yes, Arizona’s economy is facing some turbulence—but it’s more of a recalibration than a crisis. Growth is still happening. Jobs are still being added. People still want to live here.

Market shifts aren’t something to fear—they’re something to understand. Whether you're considering buying, selling, or exploring your options, having a trusted advisor by your side makes all the difference.

At Jeff Hernandez, Esq., Scottsdale Real Estate Agent & Attorney, I’m here to help you navigate this evolving landscape with confidence and clarity. Feel free to reach out at 602-550-1114 to discuss your goals and next steps.