Welcome to 2025

As we begin the year, uncertainty seems to capture the tone of the real estate market.  Uncertainty doesn’t mean bad or good – it just means we simply need data and time to see and understand what trends are emerging.  Another factor is that many listings expire the end of December, thereby beginning January with an “improved market” for sellers.  That is a seasonal effect – and bears little significance as it happens every year.  As the Cromford Report confirms “Let us not get over-excited. With many sellers taking their homes off the market for the holidays, it would be unusual if the market had not improved for the remaining sellers during the 50th week of the year. Something around 5% improvement between November and December is just par for the course”.  Add to that a very long and heated election period– and despite our statement that elections themselves have little effect on the real estate market –psychologically people believe that post-election 2025 is bound for a shift.  And they are right in that mortgage rates react to the effects of inflation, economic growth, and fiscal policy (just not the election itself).  Candidly, our crystal ball is not working as to what will be the effects of this new administration.

Back to our market, the greater Phoenix real estate market spends far more time as a seller’s market than as a buyer’s market (which most consumers are unaware of).  Point in fact, in the last few weeks of November we entered a buyer’s market for only the 4th time in the last 25 years.  However, as usual, God is in the details. 

The luxury market and the mainstream market are fueled by different economic engines and therefore do not always act in unison.  This is the case currently.  Luxury is experiencing rising pricing and activity courtesy of the robust stock and crypto markets.  Contrast that to the mid- market, and you see demand and pricing struggling due to  mortgage rates in the high 6%+ range.

When we look at supply and demand, we see the fundamentals behind the buyer’s market.  While demand hit a low in September and has improved if only a smidge, supply has risen during that same period.  To quote the Cromford Report “…Buyers have benefited from more choice and sellers are suffering increased competition.” Further the report states : “It continues to be a frigid market for most zip codes in Greater Phoenix with the lowest contract ratio* (listings under contract divided by active listings) we’ve seen since January 2015, 10 years ago.”

As to pricing, we are seeing the luxury market increasing while the mainstream market is vulnerable to erosion.  Given the low purchase activity – there is little to suggest upward pricing and in the outer fringes of the valley there is unquestionably downward pressure on price.  It is important to remember that pricing is a trailing indicator, not a leading one.  It can take months for pricing to respond to shifts in the market.  So really it is a question of how long this buyer’s market will last?  If interest rates decline to the 6% range – we will see demand respond and respond more rapidly than supply can.  At which point, buyer advantage will cease.  If they remain stubbornly above 6.5% then likely we will see further downward pressure on pricing.

There is a final point that we wish to make, while we can and do dissect the market and scan the horizon for trends and shifts, one thing remains unchanged.  Whatever the market – we sell homes.  What changes for us is the marketing strategy.  After over 45 years of selling homes in the valley in every type of market, we know that we can sell YOUR home.  Markets do not scare us.  Therefore, they should not scare you.  You can count on us.  Whatever 2025 brings, when we know – our clients will too. 

Russell & Wendy Shaw

(Mostly Wendy)