What to Expect in Arizona’s Real Estate Market Heading Into 2026
Arizona Real Estate Forecast 2026 | Scottsdale, Phoenix & More
As 2025 winds down, Arizona’s residential real estate market finds itself at a crossroads. Volatile mortgage rates, evolving supply, buyer caution, and seller confidence are all converging to test whether the market can sustain momentum or shift course. What unfolds in Q4 2025 may well set the tone for the entire year ahead.
Key to the trajectory is the behavior of mortgage interest rates. While many assume changes in the Federal Reserve’s rate directly drive mortgage rates, history and recent performance reveal that the relationship is more complex and indirect—shaped by bond yields, credit spreads, inflation expectations, and lender margins.
In mid-2025, mortgage rates have hovered slightly above recent lows, indicating continued volatility. Against this backdrop, local trends in listings, days on market, and new builds will influence how much pricing power buyers or sellers retain. The Cromford Supply Index in Phoenix suggests supply pressure may ease somewhat, though demand remains steady.
Below, we explore what to expect in Q4 2025, strategic advice for buyers and sellers, and three possible market scenarios for 2026.
What Sellers Should Prepare For
Pricing Pressure Rising in Some Markets
In many mid- and entry-level Arizona markets, homes are languishing on the market longer. Buyers now have more leverage to negotiate price reductions, repair credits, or assistance with closing costs. Sellers who price ambitiously or don’t differentiate their listings risk being left behind.
That said, high-end and luxury submarkets, especially those in established neighborhoods or with premium amenities, may maintain more pricing resilience. Inventory is thinner, and buyer demand in those tiers tends to be more committed.
Supply Constraints Easing
Phoenix’s Cromford Supply Index is showing signs of a flattening and slight uptrend, suggesting that the tight inventory environment of recent years could loosen. As more homes come to market, sellers will compete not just on price, but on presentation, staging, and marketing excellence.
Timing Matters
Listings in the early part of Q4 (October through mid-November) may attract buyers aiming to complete transactions before year-end tax and cost considerations. December listings, by contrast, often see softer traffic and more price sensitivity.
Smart Incentives, Where Needed
In weaker market segments, sellers may need to offer incentives—such as paying part of closing costs, including home warranties, or being flexible on closing dates—to attract buyers. In stronger submarkets, those incentives may not be necessary if the property is compelling.
Expect Stability Over Dramatic Shifts
Absent an economic shock, widespread price declines across Arizona appear unlikely. More probable is a market of stabilization, with modest gains in desirable areas and slight softness elsewhere.
Condition Will Be Critical
Homes with updated interiors, strong curb appeal, and turnkey readiness will outperform. Sellers who delay necessary repairs or cosmetic upgrades may face reduced buyer interest.
Advice for Buyers
Increasing Negotiation Leverage
In many market segments, negotiation power is shifting toward buyers. Asking for credits, price reductions, or seller contributions becomes more reasonable—particularly for homes that have lingered.
Lock Rates Strategically
Given mortgage volatility, timing your rate lock is crucial. Waiting too long can leave you exposed, but locking too early can be costly if rates fall. Look for float-down or contingency options where possible.
Don’t Assume Rates Will Keep Falling
Because mortgage rates react to a mixture of market forces rather than only Fed policy, assuming a steady downward trend is risky. Evaluate each lock window carefully.
Be Pickier with Condition
Lower demand homes—older, in need of repair, or in less desirable locations—may stagnate. Buyers with the capital to upgrade can often negotiate better terms in these cases.
Stretch for Upside
When possible, aim for properties with stronger fundamentals—good location, solid construction, low maintenance—that can hold or appreciate more reliably if the market shifts.
Watch for Hidden Supply
Some sellers with ultra-low mortgage rates (e.g. 3–4%) may delay listing until forced. This “shadow inventory” could quietly impact pricing if it comes online suddenly.
2026 Mortgage Rate Scenarios & Market Impacts
Scenario 1: Rates Fall Below 6%
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Demand could surge, especially from buyers previously sidelined.
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Home sales may increase 5–10% in some Arizona submarkets.
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Price appreciation could return to healthier ranges (3–7%) in strong areas.
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Early Q4 2025 buyers may see equity gains as the market gains momentum.
Scenario 2: Rates Remain in Mid-6% Range (Base Case)
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Market becomes segmented: top-tier areas may see modest gains, while average markets plateau or soften slightly.
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Appreciation of 1–4% is plausible in strong submarkets; weak ones may see flat or slight declines.
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Builders may offer more incentives to close deals.
Scenario 3: Rates Climb Above 7%
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Demand contracts broadly. Some buyers are priced out, and sellers in weaker areas may face more pressure.
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Price softening could spread beyond lower-tier segments into mainstream ones.
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New construction, particularly speculative builds, may slow or pause.
Q&A
Q: Will Arizona home prices crash in 2026?
A: A widespread crash is unlikely without a major external shock. More probable is market segmentation, where weaker submarkets may soften while desirable areas hold value or experience modest growth.
Q: When should I list my home in Q4 2025?
A: The earlier the better—October through mid-November typically sees stronger buyer activity. December listings often contend with reduced traffic and more price sensitivity.
Q: Should I wait to buy until mortgage rates fall?
A: Waiting isn’t always best. Because rates are unpredictable, locking earlier with favorable terms (e.g. float-down) can be safer than chasing lower rates that might never come.
Q: What types of homes are likely to outperform?
A: Homes with excellent condition, modern updates, energy efficiency, and strong locations or amenities will be more resilient—and often garner premium pricing.
Real estate in Arizona is entering a pivotal moment. The decisions you make in late 2025—whether buying, selling, or holding—could define your position heading into 2026.
As your local Scottsdale real estate expert, Denise McManus is here to help you interpret market signals, customize strategy, and act with confidence. Whether you’re aiming to sell your home, upgrade to luxury, or buy with an eye toward growth, Denise provides insight grounded in local knowledge and market precision.
Reach out to Denise today to discuss how these trends may impact your goals—and start preparing for your next move with clarity, confidence, and the advantage of expert guidance.
