Greater Phoenix Homebuyers Appear to Accept Interest Rate Reality

Mortgage rates have remained in a holding pattern in the 6.5% range for more than a month. While there has been pressure from the administration to ease rates, the Federal Reserve left the Fed Funds rate steady at their June meeting—with no commitment to lower any time soon and even some potential for an increase if inflation persists.

In the Greater Phoenix residential market, we are seeing acceptance of this reality among homebuyers, particularly in entry-level and move-up product. Although interest rates are not on their side, softened pricing and increased negotiability are helping to send more buyers back into the market. Prices are not what they were pre-Covid, nor will they get there, but they have fallen from the highs of 2022–early 2023, at least for entry level and move-up product.  

The other interesting factor is that many deals are stickier, with committed buyers moving through the sales process more diligently. For example, we are seeing BINSRs (Buyer’s Inspection Notice & Seller’s Response) coming in well under the 10-day deadline, with fewer requests for corrections, remediation or last-minute bids on repair work. 

Buyers remain optimistic that they will have the opportunity to refinance at some point with a lower rate. At the moment, there is too little spread between fixed mortgages and ARMs to send prospective buyers or borrowers in the direction of variable rate loans. The exception is wholesalers or fix-and-flip investors who do not plan to hold a property for the long term.

The supply-demand index decreased 0.6 points from 82.0 to 81.4 from May to June. The supply index dropped 2.9 points from 107.2 to 104.3, while the demand index fell 3.0 points from 87.9 to 84.9. Since both indexes declined by roughly the same amount, there was little change in overall index, which remains solidly in buyer’s-market range.
 

New Listings Down vs. 2025

New listings in May totaled 8,331 in the Arizona Regional MLS, down 7.1% from last May’s count of 8,963 and down 11.5% from April. It is normal for new listings to decline from March through July, so a decline month over month is not unusual. However, 11.5% is a higher drop in both percentage and number than what would be expected for new listings this time of year. Only 2025 and 2010 had similar drops between April and May in the past 26 years. Comparing all May counts, this May was the second-lowest new listing count historically, with May 2023 being the lowest. 

Meanwhile, there were 1,839 cancelled listings in May. As expected, this was up 5.1% from April, but down 13.9% from May 2025. While cancellation counts are elevated, they are better than last year. Since September, cancellations have been running roughly 7-8% of supply. That’s an improvement from June to August last summer, when they were running 9-10% of supply. 

Low new listing counts and higher cancellation rates are useful regulators that can keep supply from growing too fast and property values from falling rapidly. They also can reflect frustrations amongst some sellers, which has been highlighted in headlines from various news outlets. Seller frustrations are rooted in unmet expectations. Phoenix has been in a seller’s market for most of the past 26 years, but selling in a buyer’s market is a different experience in both time and cost. Sellers waiting or cancelling is not a warning sign, it’s normal.

Sales Volume Up vs. 2025 

May sales closed at 6,952, up 4.1% over last May’s count of 6,680. June sales were up 4.1% over last June as the end of the month approached. The primary driver of the increase in sales was demand for homes over $800,000, up nearly 20% over last June, with an extra 141 sales. Sales under $800,000 showed only a 0.5% improvement. This has caused the median sales price to rise, while appreciation rates by price range remain flat. 

The next 4-6 weeks are not expected to significantly outperform. Contract activity typically slows at this time of year; the question is whether it will continue slowing down through the end of the year like 2023 and 2024, or will the market find a spot and stabilize through November like 2025. In 2026 there are two factors pointing to stabilization, and possibly a small rebound:

• Mortgage rates. Buyer activity has reliably shown to rebound when rates fall into the low-6% range. While rates are not there currently, lower oil prices could send them on their way. 
• Rising incomes. While household income measures for 2025 from the US Census will not be released until September, hourly wage measures are released monthly and show consistent growth equating to a 31% increase since 2020 (and 60% since 2014). At the current average of $37.62/hour, a full-time employee would make just over $78,000/year. That’s enough for a dual-income household to afford a median-priced home. As price appreciation remains flat, incomes are catching up and affordability measures are improving.

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