Phoenix: The City with the Fifth-Lowest Inflation Problem

In the ever-evolving economic landscape, Phoenix stands out for maintaining one of the lowest inflation rates among major U.S. metropolitan areas. According to WalletHub's latest Changes in Inflation by City report (2025), Phoenix-Mesa-Scottsdale ranks 19th out of 23 major Metropolitan Statistical Areas (MSAs) for inflation impact, making it the city with the fifth-lowest inflation problem.


Understanding Inflation in Phoenix

Inflation, which refers to the rate at which the general level of prices for goods and services rises, can significantly impact local economies and real estate markets. Nationally, the U.S. inflation rate hit a 40-year high post-pandemic but has since moderated. As of February 2025, the year-over-year inflation rate is 2.8%, still above the Federal Reserve's target of 2% (WalletHub, 2025).


Phoenix's relatively low inflation rate reflects a Consumer Price Index (CPI) increase of only 0.9% over the past two months and 1.8% over the past year. This places Phoenix ahead of many other major U.S. cities experiencing higher inflationary pressures. For comparison, San Diego leads the nation with the highest inflation problem, reporting a 3.8% annual CPI increase (WalletHub, 2025).


How Low Inflation Benefits the Housing Market.

Phoenix's lower inflation rate offers tangible benefits for the local housing market:

1. Increased Affordability: Slower price increases help keep housing costs more manageable for potential buyers, making homeownership more accessible.
2. Stable Mortgage Rates: With inflation under control, there is less pressure on the Federal Reserve to increase interest rates, which helps keep mortgage rates stable and affordable.
3. Investor Confidence: Lower inflation contributes to a more predictable economic environment, encouraging real estate investments and long-term development projects.
For homebuyers, this means the opportunity to secure properties without the looming threat of rapid price surges. Sellers also benefit, as a stable market attracts more qualified buyers, reducing the risk of properties lingering on the market.


Phoenix vs. Other Major Cities


To better understand Phoenix's position, here is a snapshot of how it compares to other major MSAs regarding inflation impact (WalletHub, 2025):

Phoenix's position reflects a more stable economic environment, making it an attractive destination for both residents and investors seeking growth without the strain of high living costs.


What This Means for Real Estate in Phoenix


The combination of a stable inflation rate and strong market fundamentals positions Phoenix as a promising real estate market. Buyers can expect more predictable costs, while sellers benefit from a steady pool of interested buyers.
Moreover, with inflationary pressures remaining subdued, the likelihood of sharp mortgage rate increases diminishes. This encourages continued home-buying activity and enhances housing affordability for the foreseeable future.


Conclusion: Phoenix's Economic Edge


Phoenix's low inflation rate provides a competitive edge in the national landscape, fostering a favorable climate for real estate and economic growth. As inflation remains a concern for many major cities, Phoenix's stability presents an appealing option for homeowners, investors, and businesses alike.

By maintaining lower inflation levels, the Phoenix market continues to offer opportunities for those looking to invest in real estate while ensuring affordability for its residents. As we monitor future economic developments, Phoenix remains a city poised for sustained growth and economic resilience.

References
WalletHub. (2025). Changes in Inflation by City Report.