Could a Fed Rate Cut Jumpstart Arizona’s Housing Market?

by Olga Boyke - Your Trusted Arizona Realtor

When the Federal Reserve meets this week, all eyes will be on whether they cut interest rates — and what that means for homebuyers here in Arizona. The economy is showing mixed signals: the job market is softening, inflation remains a concern, but housing costs are finally showing signs of cooling.

For buyers and sellers, this moment could mark a turning point.

Shelter Inflation Is Finally Cooling

Last week’s inflation report brought a small but important piece of good news. Shelter inflation, which has been one of the biggest drivers of overall inflation, rose 3.6% year-over-year. That’s still higher than the Fed’s target, but it’s the lowest level in nearly four years.

The National Association of Home Builders (NAHB) has been tracking this closely, and their Real Rent Index shows that rent growth has been flat so far in 2025. Compare that to last year, when rents were still inching upward. This cooling trend could give the Fed more confidence that inflation is coming under control.

What to Expect From the Fed

Most experts believe the Fed will cut short-term rates by at least 25 basis points on September 17. Some are even predicting a more aggressive 50-basis-point cut, with the possibility of three cuts in total before the end of 2025.

Mortgage rates are already reflecting these expectations. The 30-year fixed rate dropped to 6.25% as of September 15, down from 6.59% just a month ago. For buyers in Arizona, that difference can add up to meaningful monthly savings.

As Fan-Yu Kuo, senior economist at NAHB, explained, lower rates could help ease the affordability crisis and give both buyers and builders more room to breathe..

The Disconnect Between Rates and Confidence

Here’s where it gets interesting: even though mortgage rates have ticked down, many buyers are still hesitant. A recent survey showed that one in three Americans believe high mortgage rates are the country’s biggest economic problem, and 75% believe today’s rates are “unusually high” — even though, historically, they’re still below the 50-year average.

That gap between perception and reality creates stress in the market. Until buyers start to feel more confident, demand will remain fragile.

Short-Term Caution, Long-Term Opportunity

Ali Wolf, chief economist at Zonda, points out that when the job market weakens, housing demand often dips in the short term. However, falling rates eventually outweigh those headwinds. Historically, housing activity tends to recover faster than the broader economy once affordability improves.

For Arizona buyers, that means patience and preparation are key. We may see a temporary slowdown as people adjust to economic news, but if rates stay lower, sales activity could rebound quickly.

What This Means for You

If you’re buying: Lower rates may expand your options and help you qualify for more home than you could just a month ago. However, demand could pick up again quickly, so getting pre-approved now and watching the market closely is important.

If you’re selling: Lower rates can bring more buyers back into the market, which may translate into stronger offers and shorter days on market. This fall could be an ideal window to list if rates hold steady.

If you’ve been waiting on the sidelines, now may be the right time to start planning. Lower rates could open new opportunities for buyers and bring more activity for sellers. Whether you’re buying, selling, or simply exploring your options, I can help you create a strategy that’s tailored to your goals.

As your Arizona Realtor, I track these market shifts daily so you don’t have to. Mortgage rates, buyer demand, and Fed decisions can change quickly, and being prepared makes all the difference.

Let’s connect and talk about what a rate cut could mean for your real estate plans here in Arizona.