Where Have Home Prices Dropped the Most in Phoenix and surrounding cities?
- Brad Daniels
- Jul 22
- 6 min read
For Buyers
Welcome to July in Phoenix, where it’s so hot we saw a bird pull a worm out of the ground with an oven mitt. The peak buying season is officially over, and while both supply and demand kicked off with a bang in the first quarter, the second quarter was a dud due to increased mortgage rates and market volatility. Where Have Home Prices Dropped the Most in Phoenix and surrounding cities?
By the end of May, many sellers had given up and decided to cancel their listings or let them expire. Cancelled listings were up 46% in June compared to last year, and expired listings were up 79%. At the same time, the number of new listings added weekly to the MLS dropped 24% from week 22 (Memorial Day) to week 27 (Independence Day). All factors combined, the result was an 8% drop in overall supply over the last 5 weeks.
While all price ranges are seeing an impact, the most significant percentage inventory drop was recorded for those over $800,000, with a 14% decline, compared with under $800,000 at just a 5% drop. The increase in cancelled and expired listings on the high end is expected seasonally, as June is typically the peak month for luxury sellers to withdraw; however, this is not to this extent. For example, Paradise Valley experienced a 39% decrease in active supply over the past six weeks, but contracts in escrow declined by only 5%. Ironically, this pushed Paradise Valley out of a balanced market and into the 3rd strongest seller’s market this month, the opposite of what most would expect during the heat of a Phoenix summer.
As for the lower end of the market, single-family homes between $250K-$300 are up 38% in June sales, with a nice bounce in new contracts over the week of the 4th of July. Single-family homes priced between $300,000 and $400,000 have seen a 10% increase in sales. Both of these price ranges have seen prices drop an average of 3.5% since last year. Condos in the same range have fallen 5.5% in price and are down 11% in sales compared to last June. Mid-range homes in the $500K-$800 range are seeing unremarkable changes in both price and June sales volume.
As prices continue to drift down in this buyer’s market, contract activity is expected to improve compared to last summer.
For Sellers
It’s business as usual for sellers, as 55% of sales closed last month. Sellers contributed a median of $10,000 to the buyers’ closing costs, and negotiations averaged 97.1% of the list price. Sales volume is about even with last year, but supply is still up 41% despite recent declines over the past few weeks, keeping sellers at a disadvantage in most areas. This means that many prices are coming down in Phoenix and its surrounding cities.
The median time on market prior to an accepted contract is 44 days, unless you’re selling a condo or townhome, in which case it’s 59 days. While buyers are negotiating to 97.1% of the last list price, it’s not consistent across all price ranges and property types. Lower price ranges will often see less of a negotiation on price and more on closing cost assistance, repairs, and upgrade requests. Upper price ranges allow for more negotiation on the price.
For example, single-family homes priced between $ 300,000 and $400,000 are negotiating within 99.1% of the list price, whereas closings of condos/townhomes in the same price range are within 97.7% of the list price. This can result in a price difference of $4,000-$6,000 in negotiations, as there are fewer large items to negotiate in a condo compared to a single-family home. Single-family homes in the higher price ranges, over $1 million, are seeing negotiations within 95%-96% of the list price.
Large negotiation gaps don’t necessarily mean sales prices are declining, and small gaps don’t mean prices are rising. Sellers often list their properties at a high price to maximize the sale price; sometimes the market obliges them, and sometimes it denies them. The gap between the original list price and the final sale price, which can involve both price reductions and negotiations, is simply the difference between a seller’s expectation of price and what the market is willing to bear. Buyer’s markets are less obliged to grant sellers their price wishes.
June sales prices for properties under $400K were down an average of 4.5% from last year. The $400,000-$600,000 range was down 2.4%. Mid-range prices, ranging from $ 600,000 to $1.5 million, remained flat, with a 0.1% to 0.8% increase over the previous year. Higher-range prices, exceeding $1.5 million, where buyers tend to negotiate harder on price, appreciated by an average of 4.4%.
Mortgage Market and Economic Update – Week Ending 07/18/2025
Let’s take a look at what happened this past week to affect interest rates and real estate.
No Tax on Home Sales Act.
This new bill, if passed, would eliminate capital gains taxes on the sale of a primary residence. In addition to saving millions of homeowners tens of thousands of dollars each, it could also increase the supply of homes for sale (by removing a powerful disincentive to sell).
Under the current law, there is a $250,000 exclusion for single filers and a $500,000 exclusion for married filers. However, those exclusion amounts were fixed in 1997, when home prices were significantly lower. It was never the government’s intention to tax Joe Q Citizen on primary home sales.
June CPI moved in the wrong direction.
In May, the CPI (Consumer Price Index, which measures inflation for you and me) surprised to the downside. In June, that reversed, with annual “headline” CPI accelerating to +2.7% YoY (from +2.4% YoY in May), and annual “core” CPI rising to +2.9% YoY (from +2.8% YoY). Remember: the CPI index gives a massive weighting to shelter costs (~44% of “core” CPI), and the Fed pays more attention to “core” PCE.
The media linked the increase in annual inflation to Trump’s tariffs, but it’s not that simple. The main reason for the yearly inflation increase is what analysts call “tough comps”. In June 2025, “core” CPI only grew 0.2% MoM. But in June 2024, it grew by +0.1%. By swapping out June 2024 and swapping in June 2025, you end up with 0.1% growth in the annual figure.
BTW, I was also quite encouraged by the low growth in shelter costs in June (+0.18% MoM, +3.8% YoY), as well as the drop in prices for both new (-0.3% MoM) and used (-0.7% MoM) cars. These are much larger items (in terms of their weighting in the index) than the tennis shoes and wall coverings that saw significant price increases due to (ostensibly) tariff effects.
June PPI was better than expected.
In June, “headline” PPI (Producer Price Index = inflation for businesses) was flat MoM — much better than expectations of +0.2% MoM. “Core” PPI was also flat MoM. However, the figure for May was also revised higher (to +0.3% MoM), making the June result appear lower. Average the two results, and you get +0.1% MoM — not much at all.
One Big Beautiful Bill Act Wins for Homeowners
Regardless of where you fall politically, the One Big Beautiful Bill Act can be viewed as a big win for real estate: it extended and/or permanently enshrined many tax breaks for homeowners.
Bond and Mortgage Market
It’s been a rough two weeks for bond yields and mortgage rates. The June BLS jobs report was stronger than expected (falling unemployment rate, +147K jobs added). The June CPI report showed accelerating annual inflation. Oh, and government bond yields have been rising across the globe (UK, Europe, Japan).
While higher bond yields don’t directly translate into higher mortgage rates, they usually trend together. As a result, average 30-year mortgage rates have moved from 6.67% two weeks ago to 6.85% this week.
Here’s what the Fed Funds Rate futures market is currently pricing in for rate cuts. Note that the current Fed Funds Rate policy range is 4.25–4.50%.
July 30 FOMC Meeting: 95% probability that the policy rate will remain at 4.25–4.50% (unchanged last week). The June CPI report had little impact.
September 17 FOMC Meeting: 59% probability that rates will be 25 bps below current (down from 63%). This implies a 25 bps rate cut at this meeting. 38% probability that rates will remain at 4.25–4.50%.
October 29 FOMC Meeting: 35% probability that rates will be 50 bps below current (down from 39% last week). 16% probability that rates will remain at 4.25–4.50%.
Market in a Minute...National View
Housing Market
The NAHB reports homebuilders are slashing prices at the fastest pace in 3 years as buyer demand weakens amid broader economic concerns.
The recently passed budget slightly boosted builder confidence in June, although confidence has remained in negative territory for 15 months.
Housing inventory was up 29% year over year in June, and nearly one-third of major U.S. housing markets are now seeing falling home prices.
Economy
Inflation data for June revealed higher prices on goods such as coffee and furniture, indicating that tariffs are starting to impact consumers.
Retail sales rebounded more than expected in June. Some of the increase is likely reflected in higher prices for some tariff-exposed products.
In a conflicting sign over the threat of tariffs on inflation, wholesale prices showed no change in June.
Comments