Image via Cromford Report February 2025.
The Arizona real estate market is off to a dynamic start in 2025, presenting both challenges and opportunities for buyers and sellers alike. With supply levels reaching their highest point for January since 2016-2017 and mortgage rates hovering around 7.25%, realtors must stay ahead of the curve to navigate the shifting landscape. Let’s break down what these trends mean and how you can best serve your clients.
Buyers: A Promising Start to the Season
Buyer’s season is officially underway, and new listings for January are the strongest Greater Phoenix has seen since 2020. This surge follows a slow November and December, giving buyers renewed opportunities as more properties enter the market. Currently, supply sits at approximately 21,000 active listings, creating an environment that favors those who are financially qualified. However, the number of pending sales in the MLS is just over 5,600—well below the typical 7,000-8,000 seen this time of year.
While mortgage rates continue to limit affordability, home prices are expected to remain stable, either flat or slightly below inflation annually. December, however, saw an unusual price spike, with the median sales price rising by 4.7% and the price per square foot increasing by 6.7%. This anomaly is largely attributed to luxury sales, which surged by 37% year-over-year for homes over $1M, compared to just 11% for homes under $1M. With stock and cryptocurrency markets rising post-2024 election, high-end buyers remain largely unaffected by interest rate fluctuations. When luxury sales are excluded from the data, annual appreciation aligns more closely with inflation at just 2.5%.
For buyers, the takeaway is clear: while rates remain a hurdle, pricing remains steady, seller incentives are abundant, and negotiation power is strong. Now is the time to get pre-qualified and explore available properties before the spring market heats up.
Sellers: The Market Is Selectively Hot
On the surface, Greater Phoenix’s real estate market may seem sluggish for sellers, but the story varies by price range and location. Several areas are showing strong demand, particularly in the lower and mid-range price points:
First-time homebuyer price ranges ($250K-$400K): High builder incentives are driving activity in Surprise, Waddell, Avondale, Tolleson, and Southwest Phoenix, as well as Mesa (85204), North Gilbert, and Chandler (85226).
Move-up buyer range ($400K-$500K): This range remains competitive in the Southeast Valley, as well as in Tolleson and North Glendale.
Luxury condo market ($1.5M+): Scottsdale (85251, 85255) and Paradise Valley are experiencing a surge in demand, making it a prime time for high-end condo sellers.
Conversely, the general condo market is under stress, particularly in the sub-$400K range, where supply has jumped 67%, and some areas are seeing zero contract activity. Condo values in the $300K-$500K and $600K-$800K ranges experienced gains from January to April 2024, only to see those gains erased from April to December. As 2025 begins, prices in these segments are flat year-over-year.
One significant factor impacting sellers this year is homeowners insurance. Rising premiums are forcing many HOAs to increase dues, which may lead to an exodus of investors as profit margins shrink. Landlords facing higher insurance and HOA costs, coupled with lower rental yields on apartment-style condos, are considering selling rather than holding.
Looking Ahead: Spring Market Expectations
Historically, January through May is prime selling season in Arizona, with buyer activity increasing as the months progress. However, mortgage rates will remain the key determining factor in market momentum. Until rates drop, sellers must stay competitive by offering rate buydowns, keeping properties in pristine condition, and pricing strategically to attract serious buyers.
For realtors, 2025 presents a unique market that demands adaptability, knowledge, and strategic guidance for both buyers and sellers. Those who can navigate these trends effectively will set themselves apart in an ever-evolving Arizona real estate landscape.