Amid Higher Supply and Slower Sales, Arizona’s Market Softened in August — but Borrowing Costs Are Easing

Arizona’s housing market spent much of this summer in a holding pattern. In August, statewide data showed signs of cooling as high mortgage rates and buyer fatigue kept activity muted. Listings climbed to 42,322—up 19.3% from last year—but buyers weren’t snapping them up. Sales came in at 7,635, essentially flat year over year, while median sales prices held at $432,000, barely ticking up 0.5% from 2024.

Adding to the slowdown was a sense of broader economic uncertainty—with mixed signals on inflation, job growth, and consumer confidence—making both buyers and sellers cautious. One of the clearest signs of this hesitation is inventory. Arizona had 5.38 months of inventory in August, up about 17% year over year.
“Months of inventory” shows how long it would take to sell all current listings at today’s sales pace. The National Association of REALTORS® considers under six months a seller’s market, about six months balanced, and above six to seven months a buyer’s market.

That makes Arizona technically still a seller’s market, but a much softer one than we’ve seen in years. Supply has grown compared to last year, giving buyers more choices and more negotiating room, and homes are staying on the market longer. Sellers are facing more competition, and pricing too high now carries more risk than it did even six months ago.

Back in August, most buyers stayed on the sidelines. Mortgage rates hovered in the mid-to-high 6s, and while there was chatter about eventual Federal Reserve rate cuts, there was no firm action—and little urgency. Sellers who listed often waited longer for offers, and many homes needed price adjustments or concessions to attract attention.

Fast forward a few weeks, and the tone has shifted dramatically.

Mortgage rates have since eased to about 6.13%–6.24%, their lowest since late 2022, sparking a surge in mortgage and refinance applications. And now, the Federal Reserve has finally made its first move in nearly nine months, voting at its September meeting to cut interest rates by 25 basis points, lowering the federal funds rate to 4–4.25%.

Jerome H. Powell as the Fed trims rates—a move with little immediate impact on mortgages.

This cut alone won’t move mortgage rates much—if at all—because mortgage rates aren’t set directly by the Fed. The federal funds rate influences short-term borrowing costs, which affect the prime rate and adjustable-rate loans. But 30-year fixed mortgage rates are more closely tied to the yield on 10-year Treasury bonds, typically running about 1.5% to 2% higher than that yield. The 10-year yield moves on investor expectations about growth and inflation—not on the Fed’s numeric rate itself. So while Fed moves can shape sentiment and expectations, they don’t push mortgage rates down in lockstep.

Still, the symbolic impact is powerful. The Fed signaled plans to cut rates at both of its remaining meetings this year, a surprise dovish shift that markets hadn’t fully priced in. It marks a clear pivot toward supporting growth as unemployment rises and inflation shows signs of re-accelerating. These are widely seen as “bad news” cuts, but they reinforce the message that borrowing costs are headed down—a narrative that’s already boosting consumer confidence.

And for the first time in months, housing sentiment is turning positive. Builders and real estate professionals are reporting new optimism that a more favorable rate environment will bring hesitant buyers back. Media coverage has amplified it, encouraging buyers to act sooner rather than later.

The sentiment shift is especially clear among middle-aged buyers (45–64), who now overwhelmingly expect rates to decline further and are re-engaging in the market. First-time buyers under 35 are also showing new interest, seeing current conditions as a chance to finally break in. High-income and financially stable households are moving first, taking advantage of competitive new offers from lenders. In contrast, older homeowners remain slower to list, often locked into sub-4% rates and less motivated to move despite improved conditions.

This doesn’t mean Arizona’s market has flipped overnight—inventory remains relatively tight by historic standards, and many buyers are still cautious. But the mood has shifted from hesitant to hopeful. Sellers who delayed listing because of “rate lock” are starting to reconsider. Buyers who pressed pause are quietly re-entering search mode. And if rates drop just a bit further—especially below the psychologically important 6% mark—the market could see a sharp rebound in activity.

For now, Arizona’s housing market is in a transitional moment: still cooling in the data, but warming fast in spirit.