» Federal Reserve Holds Interest Rates Steady—What It Means for Arizona’s Housing Market

Today, March 19, 2025, the Federal Reserve announced that it will hold interest rates steady, keeping the benchmark federal funds rate from 4.25% to 4.50%. While this decision aligns with market expectations, what caught many economists’ attention was the Fed’s indication that rate cuts could be on the horizon later this year.

This decision has direct implications for homebuyers and sellers in Arizona—especially in key markets like Phoenix, Scottsdale, and the East and West Valleys. Here’s what you need to know about mortgage rates, housing demand, and what to expect in the months ahead.

Mortgage Rates Likely to Remain Elevated for Now

Even though the Federal Reserve does not directly control mortgage rates, its policies heavily influence them. When the Fed raises or lowers rates, it impacts borrowing costs, including mortgage interest rates. Today’s announcement means that, for now, 30-year fixed mortgage rates will likely remain in the 6.5% to 7% range, barring significant shifts in economic conditions.

However, the Fed’s signal that rate cuts could be coming later in 2025 has sparked speculation that mortgage rates might decline later this year. If inflation continues to cool and economic growth slows, mortgage rates could dip slightly, providing some relief for Arizona homebuyers.

Impact on Arizona Home Prices

Short-Term Outlook

With mortgage rates still high, affordability remains a challenge for many buyers. This has already led to slower price growth in some Arizona markets, particularly in the more expensive areas like Scottsdale and Paradise Valley. Home prices aren’t necessarily falling, but they are rising much slower than the rapid appreciation seen in recent years.

Sellers should be aware that, with borrowing costs still elevated, buyers are being more selective and negotiating more aggressively. This could lead to longer days on the market and potentially more price reductions on listings that aren’t competitively priced.

Long-Term Expectations

If the Federal Reserve follows through with rate cuts later this year, mortgage rates could decline, making homeownership more affordable for Arizona buyers. This could reignite demand, particularly in high-growth areas like Gilbert, Queen Creek, and Peoria, where new home developments continue to expand.

Lower rates typically mean:

✔️ More buyers enter the market

✔️ Increased competition for homes

✔️ Stronger price appreciation

However, if rates drop too quickly, it could lead to a renewed surge in demand, pushing home prices higher again—especially given Arizona’s ongoing housing supply challenges.

Advice for Buyers and Sellers

✔️ Buyers: If you’re house hunting, don’t wait solely for rates to drop. Inventory remains tight in many Arizona markets, and home prices could rise again once rates come down. If you find a home that fits your needs and budget, locking in today’s rate with the option to refinance later may be competent.

✔️ Sellers: If you’re thinking about listing your home, pricing it competitively is key. With fewer buyers actively looking right now, overpriced homes are sitting on the market longer. Demand could pick up if rates drop later this year, so timing your sale carefully may give you an advantage.

Final Thoughts

The Federal Reserve’s decision to hold rates steady today wasn’t surprising, but its hints at future rate cuts could have significant implications for the Arizona housing market. Buyers and sellers alike should stay informed and be ready to adjust their strategies based on economic changes.

For those in the market now, the key is to work with experienced real estate professionals who can guide you through today’s challenging market. Whether you’re looking to buy, sell, or invest, staying ahead of rate changes and housing trends will be essential in making smart real estate decisions.

Have questions about buying or selling in Arizona? Feel free to reach out—I’d be happy to help navigate this evolving market!

Grant Van Dyke