Mortgage Rates: We’ve Had Worse
Home Prices are Stable, Payments are Volatile
For Buyers
The best description for the housing market vibe this month is disappointment. Average mortgage rates are front and center
again, and not in a good way. After hovering around 6.75% for most of August, conventional rates shot up to 7.24% in less than 2 weeks in anticipation of the Federal Reserve raising the Fed Funds Rate. That is nearly a half percent increase, equating to roughly a 5% increase in a principal and interest payment. On a $3,000 monthly payment, it’s an extra $150, which isn’t enough to disqualify most active buyers but the “shock and awe” has stalled demand back to 2023 and 2024 levels. Home values didn’t crash in 2023 or 2024 when rates were routinely over 7.25%, and market indicators do not support a crash in 2026. However, they may glide with less demand. Ironically, it’s not the rate itself that has caused such a sharp pause in buyer activity, because more homes sold in previous years with the same or higher rates. It’s the volatility of the rate. Buyers typically pause when the rate is actively rising or actively falling, waiting for it to find stability. This pause provides a window of opportunity for those buyers who can shoulder a higher payment temporarily and negotiate a better deal on the price or terms of their purchase. When rates decline again, they may refinance their home and enjoy a lower payment.
Those who purchased in 2023 at 8% in October were able to refinance at 6.6% by December, or 6.1% by September 2024. Rates increased to 7.25% by January 2025, and those buyers were able to refinance to 6.1% by September. As a rule of thumb, every 1% change in mortgage rate equates to roughly a 10% difference on the principal and interest payment.
Meanwhile, incentives remain primarily focused on seller-paid closing costs and rate buy-downs that effectively drop a buyer’s principal and interest payment temporarily by 10-20% for a year or two. In August, 59% of all MLS sales involved some form of seller-paid incentive of this nature, with a median cost to the seller at just over $10,000. The top price range for incentives is $350,000-$400,000 at 71% of sales. The 4th quarter is seasonally the best time to be a home buyer in Greater Phoenix anyway, so expect new construction incentives to ramp up as well. Buyers who can shoulder the higher rate can negotiate better terms on the home they want today, and get the payment they want when rates decline in the future.
For Sellers
Higher mortgage rates are nothing new for the housing market, and the tools used to sell homes over the last 3 years are still effective today. However, sellers should be prepared for longer marketing times as the calendar approaches the holidays. It’s not uncommon to see a median of 50-60 days on market prior to an accepted contract in the 4th quarter. October is a very popular month for new listings, especially in luxury and retirement communities as the temperatures drop, but it doesn’t always coincide with a boost in demand. With this in mind, long-term tracking tells us consistently that properties that go under contract within 15 days of listing typically get 99% of their original asking price on average. Listings with 1-2 months on market average 95% of their original asking price, and those with 3-4 months on market average 90%. Buyers have consistently negotiated around 97-97.5% of the last list price for nearly 2 years, so the closer sellers can get to where the buyers believe the price should be, the faster they will get a contract close to asking price.
August closings were down 6.3%, the first time all year that monthly sales did not outperform 2025. However, the luxury market over $1.5M continues to be strong with August sales up 15% over last year. More specifically, sales over $3M were up 59% in August with 62 closings compared to 39 last year. Luxury buyers do not rely on mortgage rates; instead, they are influenced primarily by stock market performance and corporate profits. Corporate profits hit another record in Q1 this year and the stock market has remained resilient through the year.
Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2026 Cromford Associates LLC and Tamboer Consulting LLC
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Misha’s Observations:
How’s the Phoenix Real Estate Market?
It’s a question I’m hearing more than usual- and understandably so. There has been a lot happening in the world, from political and economic uncertainty to environmental concerns, while Arizona continues to make headlines around water, extreme temperatures, and the rising cost of living.
I’m not here to tell you that none of this matters and that the real estate market will simply carry on as usual. But I’m also not here to make grand predictions about a market crash.
For now, the Phoenix market is slowing modestly, and we may see activity remain somewhat quieter through the end of the year as buyers and sellers navigate continued uncertainty, the upcoming midterm elections, and potential volatility in the stock market.
Rather than trying to predict what comes next, I think it’s more useful to focus on what is happening in the market right now- because real estate remains a fundamental part of life, and people will always need to buy, sell, move, downsize, relocate, and find homes that work for them.
For Buyers
My buyers are cautious, but they are still active- and that is consistent with what I’m seeing in the broader market.
When rates move higher, buyers tend to become more selective and less pressured to make a quick decision. I haven’t necessarily seen a significant drop in the number of buyers we are helping; instead, I’m seeing buyers take more time to search for the right home.
There is less urgency to compromise simply to secure a property or a particular interest rate. And when the right home does come along, buyers are still willing to act.
We are also seeing opportunities in negotiations. Depending on the property, price point, and days on market, buyers may be able to negotiate seller concessions, price reductions, and repairs that may have been more difficult to secure in a faster-moving market.
If your budget comfortably supports today’s rates, there are real opportunities for buyers right now.
For Sellers
My sellers have generally been patient and, understandably, a little frustrated- but I’m not seeing panic.
With days on market increasing across many price points, sellers need to be prepared for the possibility that selling may take longer than it did in previous years. That doesn’t necessarily mean chasing the market downward.
Instead, this is a time to focus on the things you can control: pricing thoughtfully, maintaining the property, presenting it well, being prepared for showings, and having realistic expectations about the timeline.
Concessions have become a meaningful part of many transactions, but every negotiation is different. When a buyer isn’t asking for concessions- or when their financing structure allows them to contribute more toward the purchase price- the conversation often shifts back to price.
Sellers don’t necessarily need to give everything away. There are still plenty of negotiations where both sides make concessions, and the goal is to find a point where the terms work for everyone.
The Bottom Line
This is not a market I would describe as frozen, nor is it a market where everything is moving quickly. It is a more deliberate market.
Buyers have more time to evaluate their options, and sellers need to be thoughtful about price, presentation, and patience. For both sides, having a clear understanding of the specific neighborhood, price range, property type, and current competition is more important than relying on broad headlines about the Phoenix market.
Real estate is local—and the story can look very different from one neighborhood or price point to another.
If you’re curious about what the market means for your particular home, neighborhood, or plans, I’m always happy to provide a more personalized perspective. Reach out anytime and I can walk you through what I’m seeing and how it may affect your next move.