Many Relocating to Water-Starved Phoenix

​Phoenix has recognized it has a water crisis – and has even taken action to combat it – yet it, along with water-deficient Las Vegas, is the most migration popular destination for relocators, according to a new survey from Redfin.

Drought-stricken areas and areas that are proven targets for natural disasters – such as parts of Florida – are prime areas to relocate even though the threat of natural disasters intensifies. The thinking goes: they are more affordable areas than many coastal markets.

Overall, Redfin said, a record one-quarter (25.4%) of homebuyers nationwide are looking to move to a different metro area, up from 23% a year ago and less than 20% before the pandemic.

“Climate risks haven’t yet stopped many homebuyers from moving into areas that don’t have enough water, like Phoenix, and places that could eventually be underwater, like coastal Florida,” Redfin Chief Economist Daryl Fairweather said in prepared remarks.

“That’s because even though Sun Belt home prices soared during the pandemic, those metros remain a bargain for people relocating from expensive coastal cities. Arizona’s recent limit on new construction isn’t likely to deplete inventory enough—or push prices up enough—to change that calculus much in the short term.”

Phoenix is taking steps to deter new housing development in its market. It recently announced it is overhauling its water standards for new development in the city as groundwater shortages and shrinking Colorado River supplies squeeze the Valley.

The City Council in June passed “The Sustainable Desert City Development Policy,” which aimed to reduce water consumption among residential and commercial users, mostly by implementing better efficiency before buildings are constructed but also by incorporating and considering some restrictions.

“The resolution also dissuades the council from annexing land outside the water department’s service area during a drought,” USA Today said.

Nonetheless, three Phoenix submarkets saw their inventory grow by more than 10% in the past year, GlobeSt.com reported in June, though the city has been one of the fastest-growing apartment markets of the last 10 years.

According to another RealPage Analytics article from March 20, 2023, 46,800 units were underway at the end of 2022, and inventory will increase by another 12% in the near term.

Among the submarkets seeing a boom are Central Phoenix, which logged the biggest increase at 15.9%, while Gilbert and Avondale/Goodyear/West Glendale posted increases of about 11% to 12%. Gilbert logged impressive absorption.

The water situation is “a sign of looming trouble in the West and other places where overuse, drought, and climate change are straining water supplies,” reported The New York Times.

“The decision by state officials very likely means the beginning of the end to the explosive development that has made the Phoenix area the fastest growing metropolitan region in the country,” NYT said.

Redfin’s top destinations list included others facing extreme climate risks. For example, parts of the Sacramento area face high wildfire danger and many Florida metros are very susceptible to flooding.

Indeed, some insurance companies have even stopped providing coverage to homeowners in California and Florida due to the high risk of damage by natural disasters.