Are Homes Overvalued in the Greater Phoenix Area? Only six Cities are considered Seller’s Markets now.

For Buyers

In April, there was a crisis of “crisis” headlines, spurred by unexpected tariffs and market volatility. The result was mortgage rates rising from 6.6% to 7.1%, which is nothing new for the housing industry. In fact, mortgage rates were higher at 7.2% just last January and even higher last May at 7.3% without any headlines screaming “crisis". Unfortunately, this time, active buyers froze with indecisiveness and shock, resulting in an 18% drop in weekly accepted contracts for three weeks after the tariff announcement. Fortunately, the first few weeks of May saw a slight recovery as some buyers woke up and returned to business.

From the mess of chaos, a wave of opportunistic negative predictions about the housing market erupted across social media platforms. Even Newsweek ran an article suggesting that homes in Greater Phoenix could drop by 20%. While buyers would certainly swarm the housing market if property values suddenly dropped by 20%, the chance of that happening is slim. While Greater Phoenix is slipping farther into a buyer’s market, it’s not extreme enough for a collapse of that magnitude. Buyer’s markets over the past 25 years, excluding the 2008 sub-prime mortgage collapse, saw prices drop between 5% and 11% year-over-year, and those price declines were enough to pull the market back into a seller’s market each time.

Questions persist about the degree to which Greater Phoenix homes are overvalued. To answer this, a basis must be established before the 2005-2008 bubble/crash, and a “typical home” must be defined. The median home sold in Maricopa County was 1,600 square feet in 2000 and 1,900 square feet in 2025, so a single-family home of 1,500-2,000 square feet is typical for this region. The annual appreciation rates from Q1 2001 through Q1 2004 ranged from 3.6% to 5.3%, with a median of 4.65%. The median rate across 25 years from Q1 2000 to Q1 2025 is 5.3% (high of 32.9% and low of –41.4%). Extrapolating the 4.65% appreciation rate over 25 years supports a price correction of 3% by next year. However, one could argue that prices are currently in line with where they would’ve been with a 5% annual appreciation rate over 25 years, below the 5.3% long-term median, and are already undervalued. Either way, the current buyer’s market supports declining prices over the next 3 months; 20% is extreme, but 3% is more reasonable. If mortgage rates move closer to 6.5% or lower, all projections will change again.

For Sellers

Brace yourselves, some buyers have become drunk with power. Negotiations have evolved from repairs and closing costs to remodeling requests in some cases, asking to replace things that are functioning correctly, but are not new or upgraded. Only six cities are left in seller’s markets, which are not very strong. They are El Mirage, Apache Junction, Tolleson, Chandler, Avondale, and Fountain Hills. Interior cities Glendale, Phoenix, Paradise Valley, Scottsdale, and Gilbert all dropped from seller’s markets to balanced markets over the past 30 days, joining Mesa, Tempe, Cave Creek, Anthem, and Laveen. The remaining 13 cities are still in buyer’s markets.

After having the best year ever for sales over $1M, volatility in the stock market in March and April caused lower luxury sales in April. At the same time, lower mortgage rates in March led to more closings under $500K in April. Thus, sales under $500K went from 56.7% market share in March to 60.1% in April, pulling down both the average and median price measures, and showing a 3.5% drop month-over-month and a 1.1% drop year-over-year. Both months averaged 315 closings per day. April saw a drop in contract activity, so May will be weaker for sales, but hope remains for June.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report ©2025 Cromford Associates LLC and Tamboer Consulting LLC

Mortgage Market and Economic Update – Week Ending 05/16/2025

Tariff-on, tariff-off. Tariff-on, tariff-off. Is this a macroeconomic Karate Kid? It’s become tough to interpret the latest data, mainly ‘before’ President Trump’s reciprocal tariffs took effect — but what will they look like ‘after’? That’s what’s on Fed Chairman Powell’s mind.

Fed Holds Steady on Rates, Takes "Wait and See" Approach

The Federal Reserve unanimously decided to maintain its benchmark Federal Funds Rate at 4.25% to 4.5%, continuing the pause established in January. This widely expected move comes as the Fed acknowledges increased risks to both inflation and unemployment.

Remember: The Fed Funds Rate affects the overnight lending rate between banks, influencing broader interest rates throughout the economy, though it does not directly set mortgage or long-term rates.

What’s the bottom line? The Fed remains focused on its dual mandate of price stability and maximum employment. However, these goals may pull policy in opposite directions, especially with new tariffs creating economic uncertainty. Higher inflation typically prevents rate cuts, while economic slowdowns usually trigger them.

Given the uncertain impact of trade policies, Fed Chair Jerome Powell emphasized a cautious approach in his post-meeting press conference: "We think right now the appropriate thing to do is to wait and see how things evolve." Powell used "wait" over twenty times during the Q&A session.

The Fed will closely monitor upcoming inflation and employment data, as future policy decisions could depend on which risks materialize first.

US-China Tariff Deal Sparks Joy. 

 The world’s two largest economies agreed to a 90-day partial reprieve on tariffs, and stock markets (predictably) went crazy. The NASDAQ composite index is now 9% above its pre-” Liberation Day” levels, and is only 5% below its mid-February highs.

But bond markets weren’t so impressed.

First, money flowed out of “risk-off” assets (like bonds) and into “risk-on” assets (like stocks). Second, the risk of a recession seems to have evaporated again. The Fed Funds Futures market is now only pricing in >50% probability of a rate cut at the FOMC’s September 17 meeting!

Remember: When bond prices fall, bond yields rise. That’s just math. And when bond yields rise (e.g., the yield on 10-Year US treasury bonds is currently 4.54%), mortgage rates also generally increase.

April CPI (inflation) report was pretty tame. 

Both “headline” and “core” CPI (Consumer Price Index = inflation for you and me) rose just 0.2% month-over-month. That allowed the annual “headline” CPI figure to drop from 2.4% → 2.3%, while annual “core” CPI was stuck at 2.8%. There were no apparent signs of tariff impact yet; most of the increase came from rising “shelter” (housing) costs.

If you annualize the last three months of “core” CPI growth, you get 2.1%. And the PCE inflation measure is generally lower than the CPI (because it has a much lower weighting for “shelter” costs). And the Fed’s inflation target is 2% on “core” PCE. How close is close enough?

Mortgage Market

 Here’s what the Fed Funds Rate futures market is currently pricing for rate cuts. The current policy range is 4.25–4.50%.

• June 18 FOMC Meeting: 92% probability that the policy rate will remain at 4.25–4.50% (no rate cut). This went WAY up from last week.

• July 30 FOMC Meeting: 63% probability that the policy rate will remain at 4.25–4.50% (no rate cut). 34% probability that rates will be 25 bps below current (implying one 25 bps rate cut at this meeting).

• September 17 FOMC Meeting: 49% probability that rates will be 25 bps below current (implying one 25 bps rate cut on either July 30 or Sept 17, but not both). 19% probability that rates will be 50 bps below current (implying a 25 bps rate cut at both the July 30 and Sept 17 meetings).

Phoenix Is Evolving—Here’s What That Means for You

If you’ve been in the Valley for a while, you know growth is nothing new. But what we’re seeing now is more than just an increase in population—it’s a complete transformation. Billions of dollars in investment, new job centers, and entire communities are taking shape across Metro Phoenix. So, what’s happening, and why does it matter?

Let’s take a closer look.

🚀 Why People Keep Moving to Phoenix

Between July 2023 and July 2024, nearly 85,000 new residents chose the Phoenix metro area as home, including around 17,000 in the city of Phoenix alone. And it’s not just California transplants anymore—international migration is on the rise, too.

Why Phoenix? Think affordable living, a robust job market, over 300 sunny days a year, and room to grow. From North Scottsdale to the outskirts of the Southeast and West Valleys, housing demand is climbing—and it's closely tied to where jobs and infrastructure are being developed.

💼 Where Big Business Is Making Big Moves

In North Phoenix, Taiwan Semiconductor (TSMC) is building three chip plants and plans to double its workforce by 2030. Around the site is a massive $7 billion master-planned community called Halo Vista, featuring homes, retail, dining, schools, and more.

Meanwhile, the Southeast Valley—places like Chandler and Gilbert—is booming with new downtown areas, trendy mixed-use spaces, and big names like Whole Foods and Dick’s House of Sport.

Even the West Valley is stepping up. Cities like Tolleson and Buckeye are growing into logistics hubs with projects like Verrado Marketplace and the I-10 Gateway, ensuring jobs and amenities support new homes.

📊 Market Snapshot – April 2025

• Median Home Price (Phoenix): $457,998

• Annual Increase: 3.1%

• Top Growth Areas: Southeast Valley, North Phoenix, West Valley

• Recognition: Phoenix was named a Top 10 Housing Market for both sales activity and price appreciation by Realtor.com

Unlike some cooling markets nationwide, Phoenix is holding strong, fueled by job growth, infrastructure upgrades, and a steady influx of buyers.

⚠️ Growth Brings Challenges

Let’s be honest—this level of expansion doesn’t come without pressure. Infrastructure, skilled labor, and water resources are all being tested. But solutions are in motion:

• Local colleges are partnering with companies like TSMC to train skilled workers

• Cities are repurposing underused retail spaces to meet new needs

• Water sustainability is becoming a top priority in urban planning
  

🔮 What’s Next?

Phoenix isn’t just growing—it’s changing how we live. With lifestyle-focused communities, smarter city planning, and new opportunities on the horizon, now’s a critical time to stay informed.

Whether you're thinking about buying or selling or just want to understand where the market is headed, let’s connect. Brad Daniels and his team are here to help you navigate your real estate and relocation needs.

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