Date the Rate, But Marry The House!!!
The market in early October has completely reversed the encouraging signals we reported a month ago. At the start of September, pending listings, listings under contract, and the contract ratio had all moved back above their levels of a year earlier. That has not held. All three fell sharply during September and are now well below where they stood this time last year, while supply rose faster than it did last fall. Completed sales improved modestly over the month, but September closings mostly reflect contracts signed in July and August, not the clearly weaker contract activity in September itself.
The Sedona and Verde Valley effect we described last month remains present and fairly small. Excluding that area, closed listings were down about 5.7% from a year ago rather than the 4.8% shown in the table, and active listings excluding UCB and CCBS were up about 4.4% rather than 4.9%. This makes no material difference to signals from the pending and under-contract comparisons.
Supply rose sharply. Active listings excluding UCB and CCBS increased 8.3% over the month to 25,647 and are 4.9% above a year ago. Including UCB and CCBS, the total rose 6.4% to 28,348, 2.8% above last year. Some increase during September is normal as sellers return after the summer, but this year’s rise was more than double the 3.8% seen in September 2025. Days of inventory climbed to 134.6 from 126.0 a month ago, though it remains slightly below September 2025’s 136.6. The listing success rate improved again, from 64.7% to 68.6%, so fewer sellers gave up during September, but it remains below last year’s 70.6%.
Demand is by far the main concern this month. Pending listings fell 10.9% to 3,864, and listings under contract fell 10.2% to 6,565. Compared with a year ago, they are down 9.6% and 11.2%, respectively. Listings under contract usually decline a little during September, but this was the steepest September drop since 2022, and it follows increases in each of the last two Septembers. With supply rising at the same time, the contract ratio fell from 30.87 to 25.60, compared with 30.23 last September. Completed sales paint a more positive picture for now. September and August both had 21 working days, as did September 2025, so no adjustment is needed in either comparison. Closed listings rose 4.5% to 5,868 but were 4.8% below September 2025, and monthly dollar volume rose 5.3% to $3,502 million, down 2.5% from last year.
Mortgage rates were the big story in September, and the 30-year fixed rate now stands at 7.57%, according to Mortgage News Daily. It was 6.75% on August 27, so buyers are facing an 8.5% increase in their monthly mortgage repayments over the last 5 weeks. That represents an extra $200 per month on an 80% loan on the typical $450,000 home. This rise in costs is causing agreed contracts to fall through at the highest rate in 3 years, when mortgage rates last peaked. Some buyers appear to be leaving the market, as new contracts are down 11% year on year and 10.3% from August.
Pricing held up a little better than we expected a month ago. The average price per square foot edged up 0.8% to $293.61, though its annual gain narrowed to 2.2% from 3.8% a month ago. The median sales price rose 1.0% to $450,000, the same as in September 2025. Sellers achieved 97.36% of list price, a little better than last month and identical to last year. Looking ahead, the fall in pending and under-contract counts points to fewer closings in October and November than a year ago, and rising supply gives buyers more choice and more room to negotiate. We expect pricing to remain soft through the rest of the year, although a growing contribution from the luxury segment may support the average price per square foot.
September 2026 -
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 buydowns 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
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Information provided courtesy The Cromford Report.
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