Slowing Inflation, Steady Rates: What This Means for Arizona Housing
by Olga Boyke–Your Trusted Arizona Realtor
As 2025 winds down, a new inflation report is giving the housing market mixed signals and Arizona buyers and sellers should be paying attention. Core inflation dipped to 2.6 percent in November, lower than economists expected and the lowest level we have seen since early 2021. On the surface, that sounds like good news. Lower inflation usually opens the door for future rate cuts and improved affordability.
But this report comes with a caveat. Because of the recent government shutdown, the November data is based on incomplete information. Economists are cautioning that inflation may not be cooling as cleanly as the numbers suggest. That puts the Federal Reserve in a tough spot as it looks ahead to potential rate decisions in 2026.
Why buyers are still hesitant
Even with inflation easing and mortgage rates hovering near their lowest point of the year around 6.2 percent, buyer activity has slowed. Pending home sales fell nearly 6 percent nationwide, the sharpest drop of the year. Mortgage applications also declined, signaling that many buyers are still waiting.
Here in Arizona, I see this hesitation every day. Buyers are not just watching rates. They are focused on monthly payments, job security, and the broader economic picture. Many want reassurance that they are not locking themselves into a payment that feels uncomfortable if conditions change.
Sellers are feeling it too. New listings slowed toward the end of the year as homeowners chose to wait rather than test the market during uncertainty.
The quiet shift happening beneath the surface
While activity feels muted right now, there are important changes happening that could reshape 2026. Home price growth has nearly flattened nationwide, and Arizona is following a similar pattern. Zillow and First American both report that monthly mortgage payments are easing and that the share of income needed to afford a typical home is declining. This is the most affordability breathing room buyers have had since 2022.
That matters. When wage growth begins to outpace home price growth, conditions slowly tilt back in favor of buyers. It does not create a sudden surge, but it lays the groundwork for healthier demand once confidence returns.
What this means for Arizona moving forward
Arizona remains a high-demand state thanks to job growth, migration, and limited long-term supply. Slowing inflation and stable prices do not signal a downturn here. Instead, they point to a market that is resetting to a more sustainable pace.
The bottom line is this. The housing market is not frozen, and it is not overheating. It is recalibrating. Understanding where inflation, rates, and affordability are headed will be key to making smart decisions in Arizona over the next year.
For buyers, 2026 could offer better opportunities than we have seen in years, especially if rates drift lower and affordability continues to improve. For sellers, realistic pricing and strong presentation will matter more than ever as buyers become selective and payment-conscious.
If you are thinking about buying or selling in 2026, having a clear strategy will matter more than timing headlines. I will continue watching these trends closely so you can move forward with confidence when the moment is right.
