Phoenix Is Softening. Here's What That Actually Means for You

I'm going to be straight with you, because I think you'd rather hear it from me.

The Phoenix market has slowed down this fall. Fewer buyers are signing contracts, more sellers are cutting prices, and builders are working harder for every sale.

That's not doom and gloom. It's just where we are. And once you know what's really going on, you can make a smarter move, whether you're buying, selling, or advising clients.

What the numbers say

Start with the big picture. The Cromford Report's Market Index for Greater Phoenix was 74.3 on October 7. On Cromford's scale, 100 is balanced, so anything under 100 tilts toward buyers. Demand sits at 76.2, well below normal, while supply is about normal at 102.5. In plain words, buyers haven't disappeared. There are just fewer of them, and they're pickier, which is why sellers are negotiating.

September's sales numbers from Phoenix REALTORS back that up:

Pending sales (new contracts) fell 40.1% from last September.
Closed sales dipped 4.9%, and the median single-family sales price slipped 2.1%, from nearly $485,000 to $475,000.
Inventory rose 6.7%, to about 4.3 months of supply (it was 4.0 a year ago).

Price cuts are climbing, too. Last week I shared the national number: 20.8% of listings had a price cut in September. In the Phoenix area, Realtor.com puts it at about 29%.

And rates haven't helped. Mortgage News Daily's daily index had the average top-tier 30-year fixed around 7.6% as of October 7, right next to its 52-week high of 7.61%.

Now the other side, because honest goes both ways. Year to date, closed sales are still up 2.9%. Homes that sold in September got 98.1% of list price, the same as last year. Tina Tamboer at The Cromford Report describes home values as stable and says they "may glide with less demand."

Why it's happening

Rates jumped fast in late summer. Tina makes a good point: it's not the rate level itself that stalls buyers so much as the volatility. When rates bounce around, people wait.

If you're buying

You've got more negotiating room than you've had in a while. Use it.

Ask for help with costs. In August, 59% of Greater Phoenix MLS sales included a seller-paid incentive like closing costs or a rate buydown, with a median cost to the seller just over $10,000 (The Cromford Report).
Look hard at new construction. Belfiore Analytics says the average builder incentive on inventory homes hit $60,715 in August, up 25% from March. Only 17% of builders sold inventory homes at their advertised price, and on average they knocked off another $11,356 before contract. Ask whether a buydown is permanent or temporary, whether it's tied to one lender, and what the full monthly payment is either way.
Get pre-approved now. Leverage only helps if you can move. When the right house shows up, sellers take the buyer with numbers ready seriously.
Qualify at today's rate. If rates fall later, a refinance may be worth a look. Don't build your budget on it.

If you're selling

Price for the first two weeks. Cromford's long-term tracking shows homes that go under contract within 15 days get about 99% of original asking on average. One to two months on market averages 95%, and three to four months averages 90%.
Think concessions before price cuts. A credit toward the buyer's rate can often do more for their monthly payment than the same dollars off the price, and a credit toward closing costs cuts their cash to close. As Phoenix REALTORS board president Sammy Glassman put it, "Seller concessions can be a strategic tool for both sides."
Plan for a longer runway. Tina says a median of 50 to 60 days on market before an accepted contract isn't unusual in the fourth quarter.

For my realtor partners

Your clients see the same headlines you do. Let's be honest with them about what's happening, then show them what to do about it.

That's where I come in. Before you write an offer or counter, loop me in. I'll show your buyer or seller what a price cut, a seller credit, and a buydown each do to the payment and cash to close, side by side, so you can negotiate with real numbers.

FAQ

Is Phoenix a buyer's market now?

Overall, yes. The Cromford Report's Market Index for Greater Phoenix was 74.3 on October 7, and anything under 100 favors buyers. It still varies by city and price range, so some parts of the Valley lean more toward buyers than others, and a few still favor sellers.

Are Phoenix home prices dropping?

A little. The September median sales price was down 2.1% from a year ago, per Phoenix REALTORS. Homes are still selling at about 98% of list price.

Should I wait for rates to come down?

Nobody knows when that will happen. Today you get more choices and more room to negotiate. Run your numbers at today's rate and decide from there.

What can a seller credit pay for?

Closing costs, prepaids like insurance and tax reserves, or a rate buydown. Every loan program caps how much a seller can contribute, so check with me before your agent writes the offer.

If you're buying, selling, or advising clients in Phoenix and want to see your real numbers, let's talk. Grab a time here.

The McDermott Team of NEXA Mortgage, LLC | NMLS 1660690 | Michael McDermott NMLS 184065 | Equal Housing Opportunity

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