Phoenix, Arizona Real Estate Market Update for May 12th, 2025 - Trends & Insights
- Brad Daniels
- May 12
- 5 min read
As we head into May, the real estate market in Phoenix and surrounding areas continues to evolve, and 2025 is proving to be far more dynamic than last year. After a relatively quiet 2024, we're now seeing new patterns that could impact buyers and sellers in the summer months.
Phoenix, Arizona Real Estate Market Update for May 12t,h 2025
Fewer Cities Favoring Sellers
Only five cities improved in conditions for sellers over the last month—two fewer than just a week ago—while twelve cities shifted more in favor of buyers. The average drop in the Cromford® Market Index (CMI)* across all 17 cities was -4.1%, which is more negative than the -3.2% decline we saw the week before.
Cities such as Chandler, Tempe, Gilbert, and Scottsdale lead the trend toward buyer-friendly conditions, especially in mid-range to higher-end markets. On the flip side, Buckeye and Avondale continue to show signs of improvement for sellers, driven largely by more affordable pricing and localized demand.
Market Classifications
Three cities remain in seller’s markets (though all are very weak seller markets)
Eight cities are now considered balanced markets
Six cities have shifted into clear buyer’s market territory
Two New Trends for May
Supply Takes a Breath: New listings declined slightly after months of steady supply growth. Just 9,857 new listings were added over the past four weeks—down from the typical 10,000+ we’ve seen consistently since January. This slight reprieve will be welcome news for sellers struggling with intense competition.
Demand Begins to Dip Again: Unfortunately for sellers, demand is slipping once more. The number of homes under contract (Week 18 data) is now lower than any year since 2000, excluding the crash years of 2007 and 2008. Combined with a weak annual sales rate, this signals potential headwinds in the months ahead.
If this trend holds, we expect the Cromford® Supply Index (CSI) to level off. However, the Cromford® Demand Index (CDI) is already declining, and the CMI is dropping more quickly than it did in April—a strong signal that conditions continue to deteriorate for sellers.
What About Home Prices?
Industry forecasts from Zillow, Fannie Mae, and others still expect a stable 2025, with modest price increases by year-end. However, based on current data, that seems increasingly doubtful.
As of now:
The average price per square foot across all property types is $295.68
That’s 2.4% lower than January 1, 2025
And 3.7% lower than this time last year
If prices remain steady from here, we’ll still end 2025 in the red. With the CMI at 76, stability might be the best-case scenario.
Whether you're thinking about buying, selling, or just keeping an eye on the market, understanding these shifts can help you make more informed decisions. I'm always here to discuss specifics about your neighborhood or plans - Brad.
*Cromford Market Index™ is a value that provides a short term forecast for the balance of the market. It is derived from the trends in pending, active and sold listings compared with historical data over the previous four years. Values below 100 indicate a buyer's market, while values above 100 indicate a seller's market. A value of 100 indicates a balanced market.
Let’s examine what moved interest rates this past week and what we continue to watch in the market and the economy.
The Fed’s Preferred Inflation Measure Shows Progress
Good news on inflation! The latest PCE report reveals headline inflation remained flat month over month while dropping to 2.3% yearly (down from 2.7%). Core PCE—the Fed's favorite inflation gauge—is now at 2.6%, closer to its 2% target.
Meanwhile, consumer spending surged 0.7% in March, possibly as shoppers rushed to beat upcoming tariffs.
What’s the bottom line? Shelter costs comprise 18% of Core PCE and remain key to reaching the Fed's 2% goal. While these costs have stayed stubbornly high in official data, real-time rental reports from sources like Apartment List and CoreLogic show softer trends. As PCE catches up to these real-world rental conditions, inflation numbers should continue to improve.
The Fed’s “pause” continues. For the third meeting in a row, the Federal Reserve’s Open Markets Committee (FOMC) voted to keep the Fed Funds Rate in the target range of 4.25%-4.50%. The last time the Fed cut rates was December 18, 2024. [Federal Reserve]
April Jobs Report: Looking Beyond the Headlines
April brought a surprise with 177,000 new jobs added – well above the expected 130,000, according to the Bureau of Labor Statistics (BLS). The unemployment rate remained steady at 4.2%.
What’s the bottom line? While April's headline number appears strong, it's important to remember these figures will be revised in the coming months. Recent history suggests caution – the first three months of 2025 saw significant downward revisions (January: -32K, February: -49K, March: -43K). If April follows this pattern, job growth may fall below forecasts.
The problem is that the bond market reacts to the headline figure but typically ignores the revisions. Why? Because people are too busy looking at the new month’s headline data. As the table below shows, the number of jobs added in 1Q 2025 has already been revised down by a total of 124,000 (an average of 41,000 per month)!
BLS Non-farm payroll (monthly jobs added in thousands)
And this certainly isn’t just a 2025 thing. In 2024, the monthly job additions were revised down by a total of 211,000 (~18,000 per month). And in 2023, the monthly job additions were revised down by a total of 360,000 (30,000 per month).
Where would treasury yields (and mortgage rates) be if we got the right (revised) jobs number first? We’ll never know, but you must think a lot lower.
Mortgage Market
The Fed kept rates on hold again. A 25 bps rate cut is expected at the next meeting, but that is far from certain given the uncertain impact of tariffs.
With average 30-year fixed-rate mortgages hovering around 7%, I feel another spring selling season slipping away. If mortgage rates don’t move lower, inventory will start to pile up, which could accelerate price declines in markets where inventory (both existing and new) is already high.
Here’s what the Fed Funds Rate futures market is currently pricing for rate cuts.
The current Fed Funds Rate policy range is 4.25–4.50%.
June 18 FOMC Meeting: 66% probability of a 25 bps rate cut at this meeting (slightly higher than last week), 34% probability that the policy rate will remain at 4.25–4.50%.
July 30 FOMC Meeting: 56% probability that rates will be 25 bps below current (implying one 25 bps rate cut on either June 18 or July 30, but not both). 23% probability that rates will be 50 bps below current (implying a 25 bps rate cut at both meetings).
Housing Market
Buyers returned to the spring market despite economic jitters. Purchase mortgage apps rose 11% for the week and 13% from a year ago. (Note: this is the national trend)
According to the ICE Mortgage Monitor, first-time homebuyers made up 58% of agency purchase lending in the first quarter of 2025.
Fannie Mae reports fewer people think it's a good time to sell as rising inventory, stalled sales, and economic uncertainty fuel competition fears.
Economy
The Fed held its policy rate steady at its May meeting, warning of growing inflation and unemployment risks amid trade policy uncertainty.
Unemployment claims fell last week. After spiking briefly at the end of April, current levels again signal a stable labor market.
April's ISMN data was mixed. Manufacturing activity contracted for a 2nd straight month, while the services sector grew modestly.
East Valley Weather
Keeping it under 100 Degrees this week in Mesa, Arizona. I'll take it!
Have a great week, and don't hesitate to call or message me for your real estate inquiries.
602-679-1025 Direct
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