Phoenix Metro Update - May 2025

Are Homes Overvalued in Greater Phoenix? What Buyers and Sellers Need to Know Right Now

In recent weeks, Greater Phoenix real estate has been the center of dramatic headlines and social media chatter. Claims of impending price drops and overvalued properties make buyers hesitant and sellers nervous. So, what’s happening? Here's a grounded look at the latest market data, trends, and what it means for you.

For Buyers: Don’t Let the Headlines Scare You

April brought a spike in mortgage rates—rising from 6.6% to 7.1%—after unexpected tariff announcements rocked market confidence. While it wasn’t the first time we’ve seen rates this high (January saw 7.2%, and May 2024 hit 7.3%), this time the reaction was different: active buyers froze. Contract activity plummeted by 18% for three straight weeks.

Luckily, the beginning of May saw a slight rebound as buyers regained their footing. But the uncertainty has led to a wave of doom-and-gloom predictions, including a viral Newsweek article claiming Phoenix home values could drop by 20%.

Let’s get real: a 20% price drop is highly unlikely. Historically, even in buyer’s markets—excluding the 2008 financial collapse—Phoenix prices have declined between 5% and 11% year over year. A modest 3% correction over the next few months aligns more with market patterns and expectations.

So, are homes overvalued? Not necessarily. A look at long-term trends shows that prices today are near where they would be if homes had appreciated at a steady 5% annually over the past 25 years. That’s below the 25-year median appreciation rate of 5.3%. If anything, homes might be slightly undervalued based on that trajectory.

Bottom Line for Buyers: This is still a buyer’s market, not a crash. If rates dip closer to 6.5%, the tide could shift quickly. Don’t let fear stop you from acting on opportunity.

For Sellers: It’s Time to Reset Expectations

The landscape for sellers has changed dramatically. Only six cities in Greater Phoenix remain in seller’s markets:

• El Mirage
• Apache Junction
• Tolleson
• Chandler
• Avondale
• Fountain Hills

Meanwhile, once-reliable strongholds like Scottsdale, Phoenix, Glendale, Gilbert, and Paradise Valley have all shifted to balanced markets. 13 cities are now in buyer’s market territory, reflecting a widespread power shift.

This shift has emboldened some buyers, with negotiations going beyond repairs and closing costs into remodeling requests, asking for upgrades on items that are perfectly functional but not brand new.

April’s volatility also impacted different price brackets. Luxury home sales ($ 1 M+) dipped due to stock market uncertainty, while lower mortgage rates in March led to a jump in sub-$500K closings in April, increasing their market share to 60.1% and pulling down average price metrics.

Bottom Line for Sellers: Be prepared for tougher negotiations and set realistic expectations. The market is no longer in your favor, but informed pricing and smart presentation still win.

What This Means for the Greater Phoenix Market

The current cooling period isn’t unusual—it’s a recalibration, not a collapse. A 3% price dip is far more likely than the dramatic forecasts floating around online. For buyers, this could be a brief window to act before rates or confidence rebound. For sellers, flexibility and strategy are key to staying competitive.

Final Thoughts

Markets shift—that’s the nature of real estate. What doesn’t change is the value of good information and strong guidance. Whether you're a buyer eyeing your first home or a seller navigating a new reality, aligning your expectations with the actual market—not the headlines—is the smartest move you can make.

Have questions about how this market shift affects your goals? Let’s talk. I’m here to help you make confident, informed decisions every step of the way.

Bret Johnson
REALTOR®, Realty Network Group
📞 602-502-6468
📧 bret@renetgroup.com

Reference:

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2025 Cromford Associates LLC and Tamboer Consulting LLC