Mortgage Rates: We’ve Had Worse. Home Prices are Stable, Payments are Volatile

There’s a moment in every real estate market when buyers start asking themselves the same question: “Should I wait?”

I’ve been hearing that question a lot lately, and honestly, I understand why. Mortgage rates have moved quickly, and when you’re watching your potential monthly payment change by hundreds of dollars in a matter of weeks, it is hard not to pause and wonder if waiting a little longer might put you in a better position.

After hovering around 6.75% for most of August, conventional mortgage rates climbed to 7.24% in less than two weeks as the market anticipated another Federal Reserve rate increase. That kind of movement gets people’s attention, especially buyers who have already spent months trying to figure out what they can comfortably afford.

But after watching the Phoenix real estate market through different cycles, I think there is an important distinction getting lost in the conversation right now: home prices are relatively stable, while payments are volatile.

Those are two very different things, and I think it is worth looking at what that actually means for buyers before deciding that the answer is simply to wait.

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.

I think this is one of those moments in real estate when it is easy to let one number, in this case the mortgage rate, make the entire decision for you, when there are actually several other pieces of the puzzle that deserve just as much attention.

Yes, rates are higher than buyers would like, and yes, a higher rate can make the monthly payment feel considerably less comfortable, but we have been in markets with rates at these levels before, and what I find more interesting right now is that buyers may have something working in their favor that they would not necessarily have if rates suddenly dropped and demand came rushing back.

There is a difference between buying a home at a higher rate and buying a home at a higher rate with no negotiating power. Right now, depending on the property and the seller, buyers may have an opportunity to negotiate on price, ask for closing cost assistance, secure a rate buydown, or structure the transaction in a way that makes the payment more manageable, and those opportunities can become much harder to find when the market shifts and competition increases.

Of course, I would never tell someone to buy simply because I believe rates will eventually come down, because nobody knows exactly when that will happen, and your decision should always make sense based on your finances today. But if you are financially prepared to buy and you find the right home at the right price, I also would not let the current rate environment automatically convince you that there is nothing worth considering.

Sometimes the best opportunities in real estate don't come when everything is working perfectly in your favor. Sometimes they show up when the market feels a little uncertain, when other buyers are hesitant, and when a motivated seller is willing to have a conversation.

So if you're asking me whether I think buyers should wait simply because mortgage rates are above 7%, my answer is not necessarily. I would rather look at the entire deal, understand what the seller is willing to do, look closely at the numbers, and decide whether the opportunity makes sense for you today, rather than trying to guess what the market will look like six months from now.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report

©2026 Cromford Associates LLC and Tamboer Consulting LLC