Phoenix MSA Housing Market Update – February 2025

The Phoenix metropolitan housing market continues to evolve, shaped by interest rate movements, inflation trends, and shifting buyer sentiment. As we move into 2025, key economic indicators highlight both challenges and opportunities for homebuyers and investors.

Mortgage Rates and Economic Influences

Mortgage rates remain elevated and highly sensitive to economic data as the Federal Reserve maintains its cautious stance on inflation. Between March 2022 and July 2023, the Federal Open Market Committee (FOMC) raised the Federal Funds Rate 11 times before pivoting to three rate cuts in 2024—in September, November, and December. While inflation has eased significantly over the past two years, it remains a concern.

It’s important to note that the Fed Funds Rate does not directly dictate mortgage rates. Instead, mortgage rates typically track the 10-year Treasury yield, which reflects investor confidence and economic outlook. As a result, mortgage rates have fluctuated alongside changing economic conditions, influencing home affordability and buyer demand.

Phoenix Metro Housing Market at Year-End 2024

At the close of 2024, the Phoenix housing market leaned toward a buyer’s market, with increasing inventory and tempered demand due to affordability constraints. However, market trends vary by location and price points. While home prices remain elevated, their growth rate has slowed compared to the rapid appreciation seen during the COVID era.

Buyers are adopting a cautious approach, waiting for mortgage rates to drop to more favorable levels. At the same time, sellers are experiencing the lock-in effect—a scenario where homeowners, benefiting from historically low mortgage rates, are hesitant to sell and take on higher financing costs. This dynamic has limited new listings, keeping home prices from declining significantly despite lower demand.

Key Market Metrics (December 2024)

• $601,785 – Average Sales Price

• $450,000 – Median Sales Price

• 3.55 Months – Housing Supply

• 77 Days – Average Days on Market (DOM)

These figures indicate a shifting market, where buyers have more leverage than in previous years. The increase in months of supply suggests homes are taking longer to sell, providing buyers with more negotiating power. However, affordability remains a critical issue, particularly as mortgage rates continue to impact purchasing power.

Looking Ahead: 2025 Market Projections

The trajectory of the Phoenix housing market in 2025 will largely depend on mortgage rate movements, the new administration's fiscal policies and affordability improvements. If interest rates continue to decline, buyer demand may increase, leading to greater market activity. However, a significant affordability gap remains, and any price appreciation could further challenge first-time buyers and middle-income households. We are yet to see what fiscal policies will be implemented that directly affect the housing market, including the impact of tarriffs on imports from Canada and Mexico.

For buyers, patience and strategic planning will be key to navigating the market. For sellers, pricing competitively and understanding regional demand trends and buyer preferences will be crucial to achieving favorable outcomes.

Staying informed on economic trends and working with market professionals can help both buyers and sellers make data-driven decisions in an evolving real estate landscape.