Interest rates have come down, making owner-occupant purchases more affordable and potentially tipping the scales in favor of owning again. In the first week of March, the average 30-year fixed rate mortgage remained below 6%, down from 6.85% this time last year, and the lowest level since 2022. Meanwhile, 15-year mortgages (which are popular with homeowners who are refinancing) have dropped into the 5.3% range, the lowest rate since October 2024.
Lower rates not only improve affordability for prospective homebuyers, but strengthen the financial position of homeowners/sellers and would-be sellers. Applications to refinance home loans have more than doubled over the past year, allowing recent buyers to reduce their annual mortgage payment.
As we head into Arizona’s prime selling season, buyers have more purchasing power than they did last spring. For example, a buyer putting 20% down on a $400,000 home would have a monthly payment of $1,916 for the principal and interest. One year ago, that payment would have been $2,105, a difference of $189. While that may not seem like a lot, it also means more borrowers qualify for loans.
Market Variations Across Phoenix
Performance, as always, depends on price range and geography. The large central cities are in warm seller’s markets, while cities on the edge and outskirts are in buyer’s markets. Luxury properties are seeing high demand and very high pricing, particularly in Paradise Valley.
The picture is a bit trickier for entry-level and move-up buyers. Inventory is up significantly (10% on average, but higher in other areas), giving buyers the upper hand in negotiations. At the same time, the numbers may still favor renting vs. buying for many would-be buyers in this segment. Phoenix is not an outlier in that respect: A recent LendingTree report indicated that it is cheaper to rent than own in all 100 of the largest U.S. cities.
Lower rates should increase activity, decrease home-lock, and bring additional buyers back into the market, but it’s important to remember that housing is only one aspect of the overall Phoenix market. The region’s underlying economic strength, in-migration, and employment growth (especially high-wage jobs) are expected to create a positive long-term trajectory, even if there are bumps along the way.
Supply Growth Moderates
In January, total active listings were up 6.2% over last year. As of the end of February, they were only up 4.3%, which is something to watch over the next 4-8 weeks. If supply growth stalls, it could turn the overall index towards balance again, which would be positive for sellers. New listings were up year-over-year for Q4 2025 and January 2026. However, February showed a lag in new listings toward the end of the month, putting the month-to-date count down 8% from last year and Q1 overall supply down 0.7%. Elevated cancelled and expired listings are doing their part to keep supply from climbing too quickly, and builders are treading lightly on adding new inventory before their existing builds are sold.
Per RL Brown’s recent report, new home permits are down nearly 35% from this time last year. Single family homes built in 2024 or after account for nearly one-fifth of the active single-family supply, while brand new condo/townhomes only account for 4% of their active supply. Rental inventory for 12-month leases is up 6% over last year, and down 22% from its seasonal peak in November. After November, many long-term leases convert to short-term vacation rentals, then convert back to long-term starting in April. As of today, nearly a third of MLS active rental listings are for seasonal visitors.
Legislation to watch for is Arizona HB2682, which would create up to $5,000 in rental assistance paid directly to landlords on behalf of tenant families with children experiencing short-term distress. Also, watch for Arizona HB2429, which aims to give municipalities authority to enforce regulations on short-term rentals.
Contracts in Escrow Show Improvement
On the surface, January closings of 4,478 were up just 1.2%, or 54 closings, over last year’s count of 4,424. However, due to how the weekends fall, last January had 21 working days compared to just 20 working days this year. That means there were 13 extra closings per day, or a 6% increase. Contracts in escrow finally appear to be pulling away from 2025, up 4%.
As major events such as the Barrett-Jackson Car Auction and the WM Phoenix Open have come and gone, weekly new contracts are noticeably improved over both 2025 and 2024. Seasonally, contracts should continue to rise over the next 4-8 weeks, peaking in late April or May, and it appears that mortgage rates may help things out just as the season begins. For reference, every 0.1% drop in the rate is 1% off the principal and interest payment, or $25 on a $2,500 payment.
Meanwhile, according to a recent study by Trust & Will, Greater Phoenix ranks #3 in the United States for affluent millennials. Combine that with the latest Arizona employment report stating private sector earnings grew another 4.5%, and there are good reasons to be hopeful that affordability will improve in 2026. It may not be a straight line to recovery, though, according to local economist Jim Rounds. Phoenix may see some slow or negative growth in the short term, but not enough to qualify for an official recession. If this comes true, both in Arizona and nationally, then that could keep mortgage rates drifting down, and ironically help home sales improve.
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