As we move through the early weeks of 2026, it’s a good time to step back and look at how the Phoenix real estate market is shaping up compared to the same point last year. By comparing early-year data from 2026 with 2025, we can get a clearer sense of where momentum is building—and where the market is still finding its footing.
Encouraging Signs to Start the Year
Across all areas and property types, three key indicators are showing improvement compared to this time last year:
1. Active listings are growing more slowly
Active listings are up 5.5% from the start of the year. While inventory is still increasing, it’s doing so at a slower pace than in early 2025, when listings grew 8.9% over the same period. Slower inventory growth can be a healthy sign, especially when paired with rising demand.
2. More homes are going under contract
Listings under contract are up 14.7% from the start of the year, compared with 11.0% growth at the same point in 2025. This suggests buyer activity is improving and more properties are successfully finding buyers.
3. The contract ratio is improving more quickly
The contract ratio—a key measure of market balance—is up 8.7% since the beginning of the year, compared with just 2.0% growth at this time last year. This indicates demand is absorbing inventory more efficiently than it was in early 2025.
Areas Where the Market Is Still Lagging
Despite these positive signals, not all indicators are pointing upward:
1. Closed sales are starting slower than last year
The monthly rate of closed sales is down 24.1% from the start of the year, compared with a 14.7% decline in early 2025. This suggests some near-term fatigue in transaction volume.
2. Active inventory remains higher than last year
Although the gap is narrowing, the total number of active listings is still 8.9% higher than last year, down from a 12.1% gap at the start of 2026. Inventory remains elevated, even if it’s moving in the right direction.
3. Contract ratio started weaker, but has caught up
At the start of the year, the contract ratio was 6.1% lower than last year, but it has since recovered and is now essentially level with where the market stood on January 19, 2025.
A Seasonal Pause—or Something More?
It’s possible that the slower pace of closed sales reflects a natural pause. A great deal of effort is often put into closing transactions before the end of December, which can lead to a breather in January. Historically, January tends to be one of the weakest months for closed sales, with activity often rebounding by late February.
Interest Rates: Lower, But Not Driving a Surge
One of the most interesting dynamics this year is mortgage rates. As of January 19, 2026, the typical 30-year fixed mortgage rate is 6.07%, compared with 7.08% at the same time last year. A drop of more than 100 basis points is significant and would normally be expected to drive a much stronger surge in demand.
Instead, the increase in buyer activity has been relatively modest. With the contract ratio sitting at 28, the market still leans toward the cooler side.
Why Buyers May Be Hesitating
Interest rates are only one piece of the puzzle. Other factors likely influencing buyer behavior include:
- Home prices becoming cheaper in real terms (after adjusting for inflation), which can encourage buyers to wait in hopes of even better pricing.
- Falling mortgage rates themselves can prompt a “wait and see” mindset, as buyers speculate whether rates may drop further.
- Economic uncertainty, including ongoing discussion around AI and job displacement, can make some households cautious. Even if productivity data doesn’t support the most extreme fears, uncertainty around employment can push buyers toward renting rather than committing to a long-term purchase.
Bottom Line
Overall, the Phoenix real estate market is showing stronger fundamentals than it did at the start of 2025—particularly in terms of buyer engagement and contract activity. However, the improvement has been more measured than many would expect given the favorable shift in mortgage rates.
As we move further into the first quarter, the key question will be whether demand continues to build as seasonal activity picks up, or whether buyers remain cautious in the face of broader economic uncertainty. For now, the market is improving—but doing so carefully.
