Predictions for 2025, What to Expect in Q1...It’s a Buyer’s Market, Will Prices Drop?

The Emerging Buyer’s Market: Navigating Greater Phoenix Trends

The buyer’s market in Greater Phoenix is still in its early stages—just over five weeks old—but it has shown signs of stability, thanks to a balanced supply over the past two weeks. While some may anticipate falling sales prices, this market is proving to be more complex. Over the last 25 years, Greater Phoenix has experienced only three other buyer’s markets, each shaped by unique conditions, making direct comparisons difficult.

What can we expect for price trends in today’s evolving market?

The impact on sales prices largely depends on how long the market remains favorable for buyers. Historically, sales prices are the last metric to respond to a shift from a seller’s to a buyer’s advantage. The typical progression looks like this:

Seller Asking Prices Drop – As initial adjustments aim to attract buyers.
Increased Buyer Incentives – Concessions and rate buy-downs are offered to sweeten deals.
Negotiations Tighten – Final asking prices are reduced further to close sales.

This sequence often takes 3–6 months, meaning if this buyer’s market is brief, its effect on sales prices could be minimal.

Currently, price trends are holding steady, but buyer incentives are at an all-time high. In November, 53% of MLS closings included concessions, with a median seller cost of $10,000—double the long-term average of $4,000–$5,000. This represents the highest percentage of concessions ever recorded in the Greater Phoenix area.

Key Takeaway

Don’t rely on sales price measures alone to time your purchase. By the time prices reach their lowest point, many of the hidden benefits of a buyer’s market—like rate buy-downs, loan assumptions, contingent sale approvals, and property improvements—may no longer be available.

Are prices dropping?

Not yet. December sales prices are trending higher than November. For context, during the four-week buyer’s market in late 2022, prices dipped just 2.7% before rebounding in January and February as mortgage rates eased to 6%. Buyers who acted then have since seen the highest appreciation gains over the past three years.

Today’s buyer-friendly conditions offer opportunities that go beyond price reductions. Acting now means taking advantage of unique benefits that may not be available when the market shifts again.

Selling in a Challenging Market: What Sellers Need to Know

The housing market in Greater Phoenix remains cold across most zip codes, with the contract ratio* at its lowest level since January 2015. While mortgage rates have improved slightly, dropping from 7.1% in November to 6.8% as of December 12th, demand is still sluggish. Experts agree that a notable increase in buyer activity will likely require rates to dip below 6.5%, which isn’t expected in the short term.

Challenges for Recent Sellers

Sellers who have owned their homes for less than three years, especially those who purchased at the height of the market in mid-2022, are facing the toughest conditions. For these sellers, waiting another year or two could provide the appreciation needed to cover selling costs and recoup their down payment.

In contrast, sellers who have owned their homes for 3.5 years or longer are better positioned, with significant equity to help absorb today’s selling expenses.

A Unique Opportunity for 2021 Buyers

If you purchased in 2021, you may have a distinct advantage in this market: a lower mortgage rate that could be assumable by buyers. VA and FHA loans are automatically assumable for qualified buyers, offering two major benefits:

For Sellers: Reduced need for costly buyer incentives.
For Buyers: Lower monthly payments, making your home more attractive in today’s higher-rate environment.

This approach could make a significant difference when selling in a challenging market.

Hope on the Horizon: The Spring Market Bounce

While the current market is tough, the annual spring buying season offers renewed opportunities. Historically, buyer activity picks up in mid-January and continues through May. In Spring 2024, contracts increased by 83% between January and May, and Spring 2023 saw an 85% increase. Even in pre-COVID 2019, the spring season saw a bounce of 105%.

If mortgage rates decline as expected in 2025, this spring could bring stronger demand and more favorable conditions for sellers.

The Bottom Line for Sellers

In today’s market, strategic options like leveraging an assumable loan or timing your sale with the spring buying season can help you make the most of your equity. While conditions may not be ideal for everyone, sellers who plan ahead and adjust to current trends can still achieve successful outcomes.

*Contract Ratio = Listings Under Contract ÷ Active Listings