Why Home Prices Feel So Expensive (And Why the Usual Suspects May Be Misleading)

Many people feel like home prices have jumped beyond reason, and it’s easy to assume there’s a single cause. A common belief is that large investors are buying up homes and pushing prices higher. It sounds logical—but the numbers tell a different story.

The Investor Theory: Popular, but Not the Full Picture

Nationally, nearly half of Americans believe investors are the main force behind rising home prices. However, major investors—those owning 50 or more properties—make up only about 2.8% of home purchases in the past year. In other words, investors may influence the market, but they aren’t the primary driver of home-price growth.

What’s Actually Driving Home Prices Higher

The clearest factor affecting prices today is a persistent shortage of homes. When demand outpaces supply, prices rise—even without investor activity. A few issues keep inventory tight:

• Years of under-building

• Higher construction costs

• Limited land availability in key metro areas

• Mortgage rates that discourage existing homeowners from listing

This supply imbalance is a far bigger influence on pricing than investor purchases.

Phoenix Market Snapshot

In the Phoenix metro area, the numbers add helpful context to the conversation:

• Institutional investors purchased roughly 7–8% of homes statewide in the past year, slightly lower than the previous year.

• Through the first ten months of 2025, Phoenix recorded approximately 52,000 single-family home sales.

• The median sales price in Greater Phoenix hovered near $480,000, up about 0.4% year over year.

• Inventory improved but remained tight, averaging about 4.4 months of supply, and slightly lower—around 3.8 months—within the City of Phoenix.

• While small-scale investors (owning 3+ properties) are active across the U.S., their presence in Phoenix remains moderate and well below levels seen in some coastal markets.

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These figures highlight that investor activity exists, but the dominant force shaping the local housing landscape continues to be supply constraints paired with steady buyer demand.

Why This Matters for Buyers and Sellers

Understanding the real drivers behind pricing helps cut through the noise.

For buyers:

Pricing challenges are less about being outbid by major investors and more about navigating a market with limited inventory and ongoing cost pressures.

For sellers:

Strong demand and relatively lean supply continue to support pricing stability, even with fluctuations in mortgage rates or shifts in investor participation.

Bottom Line

The idea that investors alone are causing home prices to soar makes for attention-grabbing headlines, but the real story is more straightforward. In Phoenix—and nationally—the long-term lack of available homes remains the biggest factor behind higher prices. As supply slowly improves and market conditions evolve, having clear context behind the numbers makes it easier to understand where the housing market is headed next.