By Madelaine Braggs | Rose Law Group Reporter
The Phoenix housing market entered 2026 with materially different conditions than the rapid-growth years that defined the last decade. Inventory has rebuilt to healthier levels, incentives have expanded meaningfully, and mortgage rates have moderated from their 2024 peak. Yet despite those shifts, sales activity remains subdued, buyer confidence is fragile, and demand has not responded proportionally to improved affordability metrics.
Data presented by Zonda at this year’s Arizona Dealmakers conference shows that nationally, existing home sales are at their lowest level in more than 30 years, while new home sales nationally are at their lowest level in three years. Phoenix mirrors that pullback, even as it continues to outperform many U.S. markets on fundamentals like population growth, employment diversification, and long-term housing demand.
Through late 2025, Phoenix-area annual new home closings totaled approximately 22,600 units, roughly flat year-over-year but still 18% above 2019 levels. At the same time, new home contract activity declined roughly 13% year-over-year, signaling weaker forward momentum. Median new home closing prices climbed to just under $500,000, up about 4% year-over-year, while resale prices remained meaningfully lower, narrowing the traditional new-versus-existing price premium.
Inventory dynamics have shifted sharply. Months of supply in the Phoenix market now sit near 5.0 months, compared with a 10-year average closer to 8.0 months. Active listings have returned to historic norms, with Zillow listings up more than 26% year-over-year, and median days-to-pending extending to roughly 68 days, reflecting slower buyer decision-making.
Against that backdrop, builders are offering incentives averaging 6%–10% of purchase price, including rate buydowns, financing support, and design upgrades. Even so, absorption remains soft, and sales rates have hovered around 2.3%–2.4% since mid-2025, below what would normally be expected given supply levels.
Three Major Takeaways
1. Phoenix Has Ample Supply—but Demand Is Not Responding
Phoenix is now one of the most well-supplied large housing markets in the country. Roughly 75% of top U.S. markets have more inventory today than in 2019, and Phoenix is among the leaders in available product. The region also stands out for its unusually high number of Quick Move-In (QMI) homes, or spec homes deliverable within 90 days.
While QMI supply has begun to roll over modestly, Phoenix still leads the nation in QMI concentration per community. Historically, elevated supply paired with stable pricing would translate into higher sales velocity. Instead, Phoenix’s sales rate has softened, indicating that supply alone is no longer the binding constraint.
The data suggests the market has transitioned from a supply-constrained environment to a confidence-constrained one, where buyers have options but lack urgency.
2. Incentives Are Widespread—but Have Diminishing Impact
Builders across the Phoenix metro are deploying aggressive incentives, with total concessions now representing roughly 10% of home values in many communities. Mortgage rate buydowns, forward commitments, and financing programs have become standard rather than exceptional.
Mortgage rates themselves have improved. Compared to last spring, when buyers faced rates near 7%, rates in the low 6% range theoretically increase purchasing power by $40,000–$50,000 on a typical home. However, that improvement has not meaningfully changed buyer behavior.
Purchase mortgage applications remain down approximately 4% month-over-month, though they are 18% higher than the same period one year ago, reflecting incremental progress rather than a true rebound. Refinance activity has surged year-over-year, but purchase demand remains well below pre-2022 norms.
The implication is clear: affordability math alone is insufficient. Buyers are delaying decisions despite improved financing terms, signaling that psychological and macroeconomic factors now outweigh transactional incentives.
3. Demographics Explain Who Is Hesitating—and Why
Demographic behavior provides additional clarity on where demand is stalling.
- Millennials, who now represent nearly 28% of Phoenix’s population, are the most consequential group for future housing demand. About 50% already own homes and are shopping for move-up properties, while the remaining 50% are renters running rent-versus-own calculations. In Phoenix, that math remains unfavorable, offering little financial incentive for renters to buy.
- Baby Boomers, approximately 19% of the local population, are the wealthiest generation by far and a key source of in-migration from higher-cost states. However, they are discretionary movers. Many already own homes outright and are highly sensitive to economic and political volatility, making them slower to transact.
- Gen X households, about 17.7% of Phoenix residents, often hold significant equity but still carry ultra-low-rate mortgages. For this group, moving requires either substantial lifestyle improvement or financing structures that preserve their existing cost of capital.
- Gen Z, roughly 19.6% of the market, expresses strong interest in ownership but remains constrained by affordability, income stability, and labor-market uncertainty.
Across all cohorts, the same theme emerges: buyers do not feel compelled to act.
Phoenix in the National Context
Despite near-term softness, Phoenix continues to rank #8 nationally among Zonda’s Top Employment Markets to Watch, supported by long-term investments in advanced manufacturing, semiconductors, EVs, batteries, clean energy, and biomanufacturing. Since 2021, the region has attracted more than $110 billion in manufacturing investment, underpinning future job growth and household formation.
High-income employment growth remains a bright spot, and Phoenix continues to outperform the national average in new home sales pace. Yet unemployment has risen from 3.4% to roughly 4.1% year-over-year, reinforcing consumer caution.
Price-per-square-foot has begun to ease—down approximately 4.1% in Maricopa County and 3.1% in Pinal County—helping affordability at the margin. Still, the market remains overvalued by roughly 22%, according to Zonda’s valuation models.
Confidence, Not Construction, Is the Constraint
Phoenix does not suffer from a lack of housing, incentives, or long-term demand drivers. It suffers from uncertainty.
Consumers are making the largest financial decision of their lives in an environment marked by volatile employment narratives, policy ambiguity, and uneven economic signals. Builders have exhausted most tools within their control, and while incentives have softened the blow, they have not restored momentum.
Until interest rates move lower in a sustained and credible way—and until broader economic confidence stabilizes—Phoenix’s housing market is likely to remain functional but restrained. The data suggests that fiscal policy, not product strategy, will ultimately determine when buyers return in force.
