Phoenix housing market: pending sales plunge 40% as rates top 7%

A fall market that stalled

In most years, September is when Phoenix-area home shoppers come back after the summer heat. This year that return mostly didn't happen. Phoenix REALTORS reported that pending single-family sales across Greater Phoenix fell 40.1% from a year earlier. Closed sales dropped 4.9%, new listings fell 3.7%, and the median sales price slipped 2.1%, from about $485,000 to $475,000.11 Even so, inventory grew 6.7% despite the smaller flow of new listings. Supply reached 4.3 months, up from four months a year ago.11

The main cause is clear. Mortgage rates rose through September, and the cost of financing a home is pushing buyers out faster than lower prices can draw them in. Local television coverage described rising rates as further chilling a market that was already frozen.15 The board's president said buyers and sellers are pausing because rates keep moving.11

Prices: soft, not collapsing

The price data depends on which measure you use. Phoenix REALTORS put the September median 2.1% lower than a year ago. Its year-to-date median, though, was nearly unchanged at $482,000, up 0.4%.11 An ARMLS-based analysis put the Greater Phoenix median sale price at $450,000, the same as September 2025, with price per square foot almost flat.22 Within the city of Phoenix, the median fell 3.5%, from $502,500 to $485,000.11

Asking prices are falling faster than sale prices. Realtor.com data showed the Phoenix-Mesa-Chandler median listing price at $475,000 in August, down 4.8% from a year earlier. Nationally, list prices fell only 1.3%.12 The ARMLS analysis found that new listings carried a median price $25,000 above the median sale price. That gap had widened from $15,000 a month earlier.22 In practice, many sellers are still asking for prices buyers won't pay, and homes that don't sell are adding to inventory.

Over a longer period, the decline has been gradual. The S&P Cotality Case-Shiller Phoenix index in June 2026 was about 5% below its June 2022 peak.18 Seen that way, Phoenix has been easing down slowly for four years. That is very different from the crash of 2008. Prices are not what's under strain. Sales volume and buyer purchasing power are.

How bad was the drop in demand?

The 40% fall in pending sales is the most dramatic number, and it should be read carefully. The ARMLS analysis counted homes under contract differently and found them down about 10% from both August and a year earlier, at 6,057.22 An earlier review of August data made the same point: pending counts and under-contract counts measure different stages of a sale. In that month, closed sales fell only 6.8% while the pending figure looked far worse.18

The 40% figure probably overstates the drop. Still, every measure points the same way. The Cromford Market Index for single-family homes in the city of Phoenix fell from 115.8 on September 1 to 104.9 on October 1. That put it slightly below its level a year earlier.29 For every home that went under contract in September, the region added about 1.54 new listings, compared with about 1.34 a year ago.22 Demand is falling. The open question is how fast.

One area went against the trend: Scottsdale. Closed sales there rose 2.2% in September, new listings rose 2.8%, and the year-to-date median climbed 5.5% to $1.25 million.11 At that price level, financing costs matter less to buyers.20 The drops were steepest in mid-priced suburbs. Gilbert's pending sales fell 45.9% and Mesa's fell 43.4%.11 Avondale, the most affordable city in the report, saw closings fall 17%.20

Mortgage rates are the main driver

The rate outlook has changed sharply this year. A year ago, the Mortgage Bankers Association expected 30-year rates between 6% and 6.5% in 2026 and predicted rising home sales.5 As late as July, the major forecasters, including Fannie Mae, MBA, NAHB and Wells Fargo, still expected rates to stay in the low-to-mid 6% range.6

That forecast did not hold. According to MBA survey data, the 30-year fixed rate averaged 7.49% in the week ending October 2. Coverage tied the rise to Treasury yields at their highest since 2002, persistent energy-driven inflation, and expectations that the Fed will keep raising rates.1 Mortgage rates have climbed more than 100 basis points since the US and Israel began strikes on Iran in late February.1 The Federal Reserve raised its benchmark rate by 25 basis points at its latest meeting. Many experts expect a pause at the October 27-28 meeting and at least one more increase before year-end.7

On October 11, MBA issued a sharply revised forecast. It now expects the 30-year rate to average 7.3% in the fourth quarter and to stay above 7% through 2027, with the 10-year Treasury near 5%.4 Other forecasters are less pessimistic. LendingTree expects rates between 6.5% and 7% through next year, and Fannie Mae projects 6.8% by year-end.7 Even the more optimistic forecasts no longer offer much hope of relief.

In Phoenix, the effect on monthly payments is direct. The ARMLS analysis estimated that buying a $450,000 median home now costs about $225 more per month in principal and interest than a year ago. That works out to roughly $2,700 a year, entirely because of higher rates.22 Phoenix REALTORS' affordability index fell to 72 in September, from 74 a year earlier. That means the median household earns only 72% of the income needed to qualify for the median-priced home.11

Mortgage applications keep falling

National loan application data shows the same pullback that Phoenix's contract numbers show. Total mortgage applications fell 4.2% in the week ending October 2. It was the fifth weekly decline in a row and left volume at its lowest since January 2025. Purchase applications fell 2.1% and refinance applications 7.5%.3 MBA says buyers who remain are increasingly choosing adjustable-rate loans or paying points to lower their rate. ARMs made up almost 10% of applications over the past month.4 For 2027, MBA expects purchase originations to grow just 0.8% and total originations to fall 5%.4

Local agents report similar behavior. Phoenix REALTORS leaders say affordability now depends more on the monthly payment than on the price, and seller concessions are increasingly used to buy down rates.11 Sellers are still getting 98.1% of list price, but many buyers are negotiating concessions on top of that.11

Builders discount heavily but are building less

New construction is where the pressure is most visible. Builders around Phoenix are offering more than $60,000 in incentives on average, according to housing analyst Jim Belfiore.32 Business press reports that new home sales in the Valley keep falling and that overall sales volume remains more than 20% below pre-pandemic trends.31 Nationally, 38% of builders cut prices in September and 66% used incentives, the highest share since December.35

The supply picture is mixed. One market summary reported 3,900 permits for homes and apartments in June, up 14% from a year earlier.14 A broader count tells a different story. Single-family permits in Greater Phoenix from January through July were down 12.2% from 2025 and 37.2% from the 2021 peak. Multifamily permits were down 29%.34 The year-to-date figures are the better guide, since a single month can be misleading. Building is slowing, and MBA expects new construction to decline nationally over its forecast period.4

Builders are still buying land in areas they expect to grow. Lennar paid $60 million for 444 lots near TSMC's North Phoenix semiconductor campus, though its model homes are not expected until fall 2027. Fewer starts now could leave less supply when rates eventually come down. In the short run, though, builders' discounts compete directly with resale sellers who can't offer comparable incentives.14

What happens next

Phoenix is now firmly a balanced market. Supply sits at 4.45 months on the ARMLS measure, up from 3.39 in June.22 That is still short of the roughly six months usually considered a buyer's market.18 Buyers are gaining the upper hand: there are more homes to choose from, there is more room to negotiate, and builders are offering large discounts.

The weakness is in transactions, not values. With MBA now expecting rates above 7% through 20274 and applications at their lowest in more than a year and a half3, a strong rebound in demand looks unlikely soon. The most likely path is that prices stay flat or drift slightly lower, inventory keeps growing, and sales remain weak until rates fall. Buyers who need to move now have more negotiating power than at any time this cycle. Sellers who list based on last year's prices will likely face long waits on the market.