As Arizona moves through 2025, the residential real estate market is navigating a delicate balance of competing forces: mortgage rate volatility, emboldened sellers, cautious buyers, shifting supply dynamics and macroeconomic uncertainty. The final quarter of the year, Q4 2025, will test whether the market can maintain momentum or begin tipping more decisively in one direction. Even more significantly, what we see in late 2025 could set the stage for the residential real estate market in 2026.

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Before diving into forecasts, it’s critical to understand one of the core wildcards: mortgage interest rates. Many people assume a linear relationship between the Federal Reserve base (fed funds) rate and mortgage rates, but his

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