Mortgage Prediction end of 2025 - Arizona Housing Market Update

Buyers are gaining ground across the Phoenix metro area. Right now, 15 out of 18 cities favor buyers, with only Tempe, Gilbert, and Buckeye still leaning toward sellers. This is a significant shift from the seller-dominated market we've seen in recent years.

The Cromford Market Index shows a -2.6% change, which means the market is still moving in favor of buyers—but here's the interesting part: it's slowing down. Last week it was -2.8%, so while buyers still have the advantage, the rapid shift we saw earlier is losing steam. This suggests the market is finding its balance rather than heading toward a crash.

If you're a buyer, you have more negotiating power than you've had in years. If you're a seller, the window of easy sales is closing, but the market isn't collapsing—it's just normalizing.

The Phoenix market is splitting into three categories, and the distribution tells us a lot about where we're headed. We now have 6 seller's markets, 5 balanced markets, and 7 buyer's markets. This is actually the healthiest mix we've seen in months—it means the market is rebalancing, not tipping too far in either direction.

Cities like Cave Creek, Peoria, and Avondale are leading the shift toward buyer-friendly conditions. In these areas, inventory is climbing while demand stays flat, giving buyers more choices and better negotiating power on price, repairs, and closing costs.

What this means: The days of bidding wars and over-asking offers are largely over in most areas. Sellers need to price competitively from day one, while buyers should take advantage of this window before conditions tighten again.

Three major economic factors are shaping the housing market right now, and they're all working against buyer confidence.

First, job growth is stalling. We're not adding jobs to the economy like we were before, and the Federal Reserve is watching this closely. They're trying to balance maximum employment with controlling inflation, and this data directly influences their interest rate decisions.

Second, recession fears are real. A recent LendingTree survey found that 2 out of 3 Americans believe a recession is coming, and 74% say world news and current events are affecting their financial decisions. When people are worried about the economy, they delay big purchases—especially homes.

Third, mortgage rates are trending down but remain elevated. The good news is rates have started drifting lower after months of volatility. Top forecasters project rates will ease into the low 6% range by the end of 2026, with Fannie Mae estimating around 5.9%. Since the Fed began cutting rates in September, we've already seen some improvement.

The reality: Economic uncertainty is keeping many buyers on the sidelines, but falling rates are slowly bringing them back. It's a tug-of-war between fear and opportunity.

Lower mortgage rates are finally sparking renewed buyer interest, though demand is only improving gradually. After months of high rates keeping buyers away, we're now seeing both move-up buyers and first-time buyers who were previously priced out starting to re-enter the market.

Here's what makes this moment unique: both supply and demand are rising together. Lower borrowing costs aren't just bringing buyers back—they're also encouraging sellers who had been waiting on the sidelines to finally list their homes. This creates a more active, liquid market.

For buyers: This is your time. You have more negotiating power, more inventory to choose from, and rates are trending in the right direction. Don't wait for 3% rates that aren't coming back anytime soon—today's conditions offer real opportunity.

For sellers: The key is pricing strategically. The market isn't crashing, but it is rebalancing. Properties that are priced right and move-in ready will still sell—overpriced homes will sit and eventually require price cuts.

The big picture: Arizona's housing market is in a healthy transition phase. It's not a crisis—it's a correction. Whether you're buying or selling, timing and strategy matter more than ever. The advantage has shifted, and those who understand these dynamics will make the smartest moves.