There is no sugar-coating the situation in the Greater Phoenix residential market. We are experiencing a slowdown, with active listings up almost 50% vs. May 2025, although the pace of additional new listings has fallen off since mid-April and cancelled/expired listings are up. While Zillow may not represent the market as a whole, their figures for April showed that, among the 50 largest metro areas, Phoenix had the highest share of price reductions at 37.2%.
For buyers and investors, the larger inventory pool translates to a wide variety of properties to choose from, especially in the lower price ranges—and even a price cut does not mean you don’t have room to negotiate. For sellers, the message is simple: You can find a willing buyer as long as you are priced right and dangle the right incentives—otherwise, the marketplace will look elsewhere. Sellers also need to be patient, as homes sat on the market 16%-20% longer this May than last year. As has been the case since April, fluctuations in the financial markets have diminished the appetite of luxury buyers; although they are not interest-rate sensitive, they are wary of uncertainty.
In addition to all of the other challenges in the market, both buyers and sellers will want to keep an eye on homeowners insurance rates, which can stall deals or even result in cancellation in some cases. A recent industry report found that 47% of surveyed agents encountered more issues with home insurance during a transaction year over year, and 21% had “significantly more.”
Overall, 21% of agents said they had “significantly more” issues recently with homeowners insurance, such as clients having trouble getting affordable insurance or canceling a purchase because of homeowners insurance.
April to May 2025, the supply-demand index decreased further into a buyer’s market, from 77.8 to 73.6. April was a tough month for consumers as sentiment declined, fear of recession increased, and mortgage rates rose once again to 7%. Ironically, applications for purchase mortgages (an indicator for future contract activity and sales) surged, according to the Mortgage Bankers Association. If you’re looking for a silver lining going forward, consumer sentiment in May improved, as mild progress was made on national trade agreements, fears of recession retreated, and job growth, wage growth, and inflation reports were positive. The stock and crypto markets also rebounded in May, which could calm the nerves of luxury buyers. Meanwhile, the Federal Reserve decided to continue reducing their securities holdings, resulting in higher supply of bonds and keeping mortgage rates elevated.
Pace of Active Listings Slows, While Cancelled, Expired and Reductions Accelerate
- Although new listings surged to pre-pandemic levels at the beginning of this year, the number of new listings added to the Arizona Regional MLS weekly has dropped by 30% over the past 6 weeks.
- Cancelled listings in April were up 7% over March and the highest since November 2022. Year-to-date cancelled listings are up 23% over last year and the highest count since 2015. Expired listings are also up 23% year-to-date over last year, but still below 2023.
- Monthly price reductions are up 47% over this time last year, but most price ranges are still within 1% of last year’s asking prices, indicating the market continues to reject sellers’ efforts to push up on price. Approximately 56% of listings submitted price reductions over the past 4 weeks.
- First-time homebuyers looking for condos or townhomes under $300K have nearly double the supply to choose from (up 95%), list prices that are 2% lower than last year, and negotiations averaging 97.3% of list. Phoenix hasn’t seen this level of condos and townhomes for sale under $300K since 2017. Buyers looking for single family homes under $400K have 52% more to choose from and active counts not seen since the Covid-19 pandemic began in 2020. Many homes are in good condition with seller incentives that are attracting more buyers to the market.
Affordability Remains the Sticky Wicket in Home Sales
Affordability comes down to three main factors: home price, income, and mortgage rates. In the past it’s been mortgage rates that adjust to bring affordability back into normal range, eliminating the pressure on home prices and incomes. However, mortgage rates have not helped with affordability for three years now, which means that home prices and incomes will need to adjust. How are things looking on that front?
- Recent wage growth reports show positive signs that incomes continue to grow faster than the rate of inflation. Surging after May 2021 from 3% to nearly 7% annually by 2022, national wages still grew 4.3% so far this year while inflation reports were just 2.3%. In Greater Phoenix, wages were up much more, at 9.3% annually as of March.
- Higher incomes combined with lower home prices means that there’s less need for drastic mortgage rate drops to see affordability improve and demand increase. Increased wages combined with price declines on homes under $500K have already had positive effects on contract activity and closed sales compared to last year, and even last month. Listings under contract under $300K are up more than 12% over last year, and up 3% for properties between $300K-$400K.
- Early in the year, we saw declines in sales on the low end and increases in sales on the high end, which skewed price measures high. In April and May, that flipped: increases in on the low end due to improved affordability because of lower prices and higher incomes, paired with declines in sales on the high end due to uncertainty in the markets. As Maricopa County continues to rank high in population and wage growth, the market will eventually turn towards sellers again, but not today.
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