Phoenix housing market softens as spring selling season fails to ignite

Source: Phoenix Business Journal

The housing market in metro Phoenix is softening at a time when the spring selling season is usually robust.

“The market is feeling softer and softer, with many properly priced homes sitting unsold and with very few showings,” said Greg Hague, CEO of Scottsdale-based 72Sold.

In fact, said Chris Morrison, founding partner at Retsy | Forbes Global Properties, a 10-year high in inventory is creating a market that buyers have been clamoring for — despite the 7% mortgage interest rates hovering over their pocketbooks.

Metro Phoenix showed a 2.74% increase in annual home prices in February, compared with a 4.08% gain nationwide, according to the S&P CoreLogic Case-Shiller Indices released April 29.

Rising supply and softening demand typically don’t bode well for future home values, Hague said.

“Today’s Case-Shiller report is a marker, a signal that Phoenix’s real estate market is entering a new and more challenging phase,” Hague said.

As of April 28, Hague’s internal reports show the median home sale price across metro Phoenix fell to $446,000, down sharply from $465,000 just five weeks ago in mid-March, representing a 4% or $19,000 drop in a little over a month.

“Nearly half of all Phoenix home sellers are now agreeing to buyer concessions, like paying closing costs or helping to buy down buyers’ mortgage rates,” Hague said. “These are clear signs of a market under pressure, and sellers adjusting to a new reality.”

Is euphoria gone from luxury market?

Even the luxury market, which usually fares better than homes priced under $1 million, is not as robust, said Robert Joffe, co-founder and associate broker with The Joffe Group at Compass.

“The tariff concerns and stock market uncertainty have created what I would call an ‘OK’ ultra luxury market at a time when it should be a spectacular market,” Joffe said. “I’m not ready to call it bad, because it’s not, but we just haven’t had our usual first quarter euphoria.”

It’s no secret luxury sellers have prospered tremendously since the coronavirus pandemic, but for the first time in several years, Joffe is seeing a shift.

For example, Paradise Valley currently has 68 homes listed over $8 million, with 25 of those listed for over $15 million, he said.

Year to date, only 18 homes have closed for that price, with the highest being $15 million.

“That tells us we have quite a bit of inventory for the foreseeable future,” Joffe said.

The Arcadia ultra luxury market is a bit more alarming, with eight homes currently listed over $8 million, but not one has sold at that price this year, he said.

“We don’t know how the economic uncertainty will ultimately land in the long term, but I do remain bullish on real estate in Arizona,” Joffe said. “We’re going through an unsettled period, and people are trying to figure out how to handle that, but what I can tell you is we live in one of the most desirable states in the country, and people will not stop moving here.”

Compass exec: ‘You should be able to negotiate’

Joffe advises homebuyers to make a run for a home they love.

“First, you should be able to negotiate, and second, I’m certain that when interest rates come down, you’ll be sorry you didn’t, because our market is sure to fly again,” Joffe said.

Metro Phoenix isn’t the only market taking a hit.

Existing home sales slipped 5.9% nationwide in March, according to the National Association of Realtors, at a time when the median existing home price for all housing types was $403,700, up 2.7% from a year ago.

U.S. housing starts also slowed in March.

“Housing starts fell much more than expected, by 11.4% to 1.32 million annualized in March,” according to BMO Capital Markets Economic Research.

“Homebuilding activity hasn’t gained any traction over the past couple years amid high input prices, elevated borrowing costs, and downbeat sentiment, with tariffs now adding to the multitude of headwinds,” according to the BMO report.

Buyers are avoiding risk

Cory Mishkin, co-founder of Cambridge Properties, said consumer sentiment is making transactions tougher.

“We are personally dealing with buyers who are wanting to renegotiate their purchase contracts due to economic uncertainty and what they are reading in the headlines,” Mishkin said.

He’s still seeing bidding wars on some properties, but also is seeing a lot more contingent buyers.

“These buyers aren’t willing to risk taking on two mortgages right now,” Mishkin said. “They don’t know if they are going to sell their existing home — or the price they will receive — so they want to defer their risk by making contingent offers. The rule is if sellers price to market, they are under contract very timely. If they want to try to beat the market, they will sit for quite a while.”

Even with all the worldwide events distracting buyers, they are still buying homes, said Chris Karas, founder of The Karas Group at Compass Arizona.

“Over the month of April, we have still seen showings, but buyers are overall just taking a little longer to come to terms and writing an offer,” Karas said.

The average time it takes to sell a home is up 34% from last year, with an average days on market in Paradise Valley at 107 days, he said.

“Over the last 20-plus years I have been in the real estate business, I can tell you with confidence, we are still in a good market,” Karas said.

What’s causing market changes?

High mortgage rates continue to challenge affordability, while economic uncertainty — especially concerns over new tariffs that could raise prices on everyday goods — is beginning to erode consumer confidence, Hague said.

“Confidence is the oxygen of the housing market and right now, it’s in short supply,” Hague said.

The future of Phoenix home prices will be heavily influenced by what happens next with interest rates, inflation and consumer confidence, Hague said.

“If rates stay high and economic uncertainty continues, we could see additional downward pressure on home prices,” Hague said. “On the other hand, any improvement in interest rates, combined with a boost in consumer optimism, could help stabilize the market. For now, though, all signs point to a softening Phoenix market heading into summer.”

The first quarter of 2025 seemed much more like the years leading up to the coronavirus pandemic, said Libby Cohen, luxury agent at Retsy | Forbes Global Properties.

“We are seeing multiple price reductions on many properties before they get to a list price that generates activity,” Cohen said. “Sellers are coming to the realization that the pandemic frenzy is solid behind us.”

Increased inventory is offering more choices said Cohen, who recently listed a $5 million estate created by a former student of Frank Lloyd Wright.

Built in 1997, the 6,984-square-foot estate on nearly two acres at 10787 E. Prospect Point Drive in Scottsdale, is the creation of renowned architect Ron Brissette.

Homes built before 2020 that have not been significantly updated tend to take longer to sell, and often at a lower cost per square foot than a year ago, Cohen said.

Even so, highly architecturally unique properties of any age, are still selling at record prices, she said, pointing to her listing with Shelli and Sela Poulos of Retsy. The home was built around natural granite boulder within a teepee structure.

“We are seeing multiple price reductions on many properties before they get to a list price that generates activity,” Cohen said. “While supply may be going up, sellers with good representation and data to support pricing will find buyers for their properties. It just may take a little longer than it did in the past four years.”