The California luxury real estate market is shifting, and it’s opening new opportunities in Arizona.
In January 2025, the devastating wildfires in Southern California destroyed over 10,000 single-family homes. In the Pacific Palisades, the losses skewed toward the true luxury tier, with the average home lost worth $4 million. Within that group, at least 80 homes were valued at over $10 million. Roughly 15% of homes have approvals for rebuilds, and the average permit approval process is over 80 days.
This is not a dip. It’s a generation of luxury supply gone from the market.
The supply and rebuild are part of the challenge, but additional measures are stacking up against California’s luxury real estate homeowners and buyers.
The mansion tax adds 4% to all property sales above $5 million and 5.5% above $10 million. Since the law took effect, high-value transactions dropped by 30 to 50%. The already depleted luxury real estate market shrinks further, with many owners choosing not to sell.
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On a $6 million property - $240,000 in mansion tax
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On a $11 million property - $605,000 in mansion tax
Add in California’s 13.3% top income tax rate, and an insurance market that many national providers are abandoning, along with a FAIR Plan that needed a $1 billion emergency infusion to stay solvent, and you have a state that has become more expensive and risky to hold real estate at the top end of the market.
Welcome to Arizona.
About 50,000 Californians relocate to Arizona each year. In the luxury real estate market, Paradise Valley is usually the starting point. It has very limited commercial zoning, is nicely located between Phoenix and Scottsdale, and has produced consistent luxury appreciation over the last decade. Median home prices in early 2026 are just under $5 million. In August 2025, a single-family estate sold for over $32 million to set a new all-time high. Buyers for this market are largely driven by transplants from Los Angeles, San Francisco, and San Diego who are drawn by Arizona’s flat 2.5% income tax, no estate tax, and over 300 days of sunshine.
Here is the rub.
Paradise Valley has around 200 listings at any given time, with about half priced above $5 million. It sounds reasonable until you consider the volume of buyers from California and other states, currently in motion. Paradise Valley is largely built out, with little room for expansion, so the supply is limited and competition for the best of it is real.
This is why buyers who approach Paradise Valley the same way they would shop any market are going to struggle. Homes that check every box rarely sit on the MLS waiting to be found. The best transactions in this market happen before a home is ever listed through relationships between advisors and owners. Sellers considering a sale at the right price, terms, and without the noise of a public process. Off-market access isn’t a nice to have. It’s a necessity.
For buyers who want something fully custom, then land acquisition and new construction are worth a serious look. Hillside parcels with views of Camelback Mountain represent one of the few remaining pathways to a bespoke home in an irreplaceable location. Quality builds in the market often run about $2,000 per square foot, and a 7,000 to 10,000 square foot estate typically takes 24 to 36 months from land purchase to move-in. The timeline can feel long until you compare it to the 3 to 5 year rebuild clock in the Pacific Palisades.
How you structure purchases matters as much as finding the right property. California’s Franchise Tax Board is aggressive. Establishing a legitimate Arizona domicile while exiting California requires deliberate coordination between your real estate transactions and your tax and legal strategy. These decisions are intertwined.
The California migration is real, and Arizona is the natural landing spot for a meaningful share of it. But Paradise Valley and Scottsdale cannot absorb unlimited demand. The luxury home buyers who get this right in 2026 will be the ones who move with intention, work with advisors who know the Arizona market, and approach home buying as part of a holistic wealth strategy.
Templeton Walker is an Arizona luxury real estate advisor. For a confidential conversation about buying or building in Paradise Valley, Scottsdale, or other Phoenix metro markets, reach out at 480-823-5672 or email [email protected].
