Searching for Stability
2026 ECONOMIC OUTLOOK
By: Danny Court with Elliot D. Pollack & Company
2025 was a turbulent year that included mixed economic messages, volatility, and a period of driving blindly during the country’s longest government shutdown, delaying the release of economic data in the last quarter.
Negative GDP at the start of 2025 rebounded through the next two quarters up to one of its highest readings in two years. Consumer sentiment deteriorated in 2025 and recently posted its second lowest reading in history. The stock market dropped 20% after the April tariff announcements followed by a recovery by July and continued its upward march through the end of the year, thanks mostly to a small group of technology stocks focused on the AI race. Recession risk also spiked before again receding to lower and lower levels.
Low consumer sentiment is the product of inflation weary households and a stagnating labor market. 55,000 jobs per month were added in 2025 compared to 168,000 in 2024. In the last six months, it’s fallen to 27,000 jobs per month. The unemployment rate has increased to 4.4% which is still considered near full employment, but that figure remains lower than expected due to below average growth in our labor force.
Inflation has remained below 3% for over two years and currently stands at 2.6%, still well above the Fed’s target of 2%. However, because inflation isn’t worsening and there is pressure in the labor market, the Fed decided to lower interest rates three times in the second half of 2025 to encourage more economic activity.
Looking forward, most economists predict that the U.S. will avoid recession in 2026 with modest growth. The incredible amount of investment in AI infrastructure is expected to continue in 2026, fueling most of our overall growth. Additionally, consumer spending is expected to remain resilient, with the majority of spending driven by higher income households. However, any corrections in the tech sector or a worsening labor market could reverse expectations.
In Arizona, the economic outlook is still strong, though still impacted by national and global conditions. High tech sectors are continuing to expand and relocate to the state and Arizona is still a preferred destination for residents relocating from elsewhere. Single family construction took a step back while apartments continued to deliver excess units but enjoyed higher renter demand. Overall, we expect 2026 to see steady but modest growth.
Greater Phoenix Economic Forecast
“Choose Optimism, IT FEELS BETTER”
- THE DALAI LAMA
2025 Year-End Real Estate Market Update
By: Tina Tamboer with Cromford Report
Optimism is afoot as Greater Phoenix dug out of a buyer’s market in the last half of 2025 and is now close to reaching a balanced state after 15 months in the trenches. It started with a wave of cancelled and expired listings in June, which reduced supply and improved conditions for sellers. By September, mortgage rates had fallen close to 6%, and adjustable rates were at 5.6%, increasing demand in higher price ranges. By November, FHA/VA rates had dropped to the upper 5% range as well, helping first-time homebuyers in the lower price ranges. As the stock market and corporate profits continued to perform well, sales over $1.5M surged in November, increasing sales price measures for December. It was very exciting and enough to make up for the disappointing first half of the year, ending 2025 on a positive note and giving the housing industry much needed momentum for 2026.
Local builders were not feeling as optimistic as 2025 ended, however, as they scaled back new home permits by 21% in the face of a 6% drop in sales for the year (Per RL Brown Reports, a local firm specializing in new home construction data). This will have a stabilizing effect on the surrounding neighborhoods as fewer new homes added to supply lessens downward pressure on competing home prices. The market remains bifurcated as listings over $1.5m saw prices rise by 3.8% on average; $400k-$1.5m measures were flat with less than a 1% change in either direction; under $400k price measures dropped 3.1% on average. While the entire metro area is considered balanced, all major interior cities are in mild seller’s markets. Cities on the edge of town are in buyer’s markets. Projections for 2026 include mortgage rates remaining stable, stable home
prices, and affordability gradually improving. It’s not very exciting, but after excessive volatility over the past 6 years, the housing industry may welcome some boring stability.
Meanwhile, President Trump has been floating multiple ideas on social media to promote home sales and affordability. Posts ranged from suggesting a 50-year mortgage, to a portable mortgage, to using 401K funds, and buying mortgage-backed securities. Most of these ideas have been crushed by industry professionals as either temporary, ineffective, or potentially harmful, but the thought is what counts. In fact, the market is already showing improvement and it’s unclear if drastic measures by the government are necessary.
Annual price and sales measures for December 2025:
METRO PHOENIX BY THE NUMBERS
