In the wake of a quiet holiday season, January started with a flurry of market activity in the Greater Phoenix residential market. Interest rates at around three-year lows and stabilization are supporting offer activity across the board, whether entry-level, move-up, or even luxury and uber-luxury properties. Although there were concerns about a rapid increase in supply to kick off the year, current levels of product volume are nothing extraordinary. Properties are in demand, and sellers who price right and pair their properties with meaningful marketing are receiving interest and offers from buyers.
In the final week of January, the Federal Reserve held rates at the same level for the first time since July 2025. While that may come as a disappointment for buyers hoping for lower mortgage rates, it also staves off potential inflationary impacts in the market. If history serves as a guide, lower rates could result in additional appreciation and cancel out any affordability benefits.From December 2025 to January 2026, the supply-demand index increased from 84.1 to 88.9, close to balance but stalling just before breaking the barrier, giving buyers a little more time in a buyer’s market. Mortgage rates have now remained stable for 5 months straight, but optimism for more demand is being tested. There are signs that better days are ahead as Mortgage News Daily reported the index that measures mortgage purchase applications is up 156% over this time last year. The time between applying for a mortgage and closing on a home can be 2-3 months, depending on whether the applicant needs to sell an existing home first or if it’s still in the process of being built. Patience and time is still the top advice as spring approaches.
New Listings Remain Subdued in the Valley
As of the end of January, new listings in the Valley were down 3.2% from last year, while total inventory was up 6.2%. 2025 saw a total of 102,971 new listings hit the Arizona Regional MLS, up 6.9% over 2024. The biggest increase in new listings and total supply continues to be in the most affordable range under $300K, composed mostly of condominiums and mobile homes.
Buyers still have more to choose from between $300K-$500K overall, but new listings are down in these price points, which could cause inventory to dwindle later as fewer sold listings are replaced. Builders were reluctant to add too much inventory last year as annual permits were down 21% year-over-year (per RL Brown, a local analytic firm specializing in new construction). Monthly median price measures of newly constructed homes remained stable throughout 2025, with most months hitting the $490Ks while the resale single-family median was $481K and $340K for condo/townhomes. Active list prices are noticeably dropping between $300K-$600K, down 2-2.5% from this time last year.
For a buyer looking at monthly payments around $2,500 last year for a home, this equates to roughly $50 off from the drop in price, on top of a $250 drop from the 1% drop in mortgage rate, putting the same home at $2,200 this year. On the opposite side of the spectrum, luxury and pre-luxury inventory is up, as are asking prices, in preparation for the peak buying season. As new listings continue to load up, it’s typical and expected to see price reductions ramp up too. So far, 2026 is looking a lot like 2025.
Closed Sales Up, New Home Sales and Permits Down
Closed sales totaled 69,483 at the end of 2025, up 3.5% over 2024 and up 2.1% over 2023. New home sales were down 5.9% according to RL Brown, which explains why permits were down 21%. Annual sales are far from recovered and would need to see an 8% gain in 2026 just to match 2014, but at this stage the real estate industry will take what it can get.
Listings under contract are just up 3.5% over last year but need more gas to catch up to 2024 or 2023. Prices continuing to drop could provide that needed boost. All price ranges below $2M are down anywhere from 0.8% to 5.1% compared to this time last year, which coincides with a median price down 1.8% from $458K to $450K.
While these price reductions are modest and welcomed by buyers, there was a recent headline from the Phoenix New Times that stated, “Arizona home prices have plummeted in the last year.” It’s important to note, however, the article references a 3.1% drop in home values across the state based on Zillow estimated values, which hardly qualifies as a “plummet.” Few segments deserve that label in the Valley except for one, the apartment-style condominium less than 1,000 SF and under $300K. This segment has suffered extensive competition with new apartments and is down 9.4% year-over-year. At the highest price point, over $10M, there were 32 sales in 2025. If that’s not impressive enough, 2026 has already seen 8 closings over $10M in the first 4 weeks, driven by record-breaking corporate profit reports and a stock market that continues to perform. Last year’s spring luxury buying season was disrupted by tariff announcements; this year already looks promising, with Metro Phoenix ranked as the seventh-fastest moving luxury market in the nation, according to a recent Realtor.com report.
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