Uncertainty Abound 2025 MID-YEAR ECONOMIC OUTLOOK
By: Danny Court with Elliott D. Pollack & Company
Written
: July 9th, 2025
Greater Phoenix
The first six months of 2025 have been a whirlwind of action as policies unfold under the new presidential administration and geopolitical conflicts have flared up, most of which have added tremendous uncertainty to economic conditions.
The economy posted negative GDP in the first quarter. Consumer sentiment reached a recent peak in December 2024 and declined dramatically through the first five months of the year before recently posting a partial recovery. The stock market whipsawed with a 20% drop after the April tariff announcements followed by a recovery to all-time highs by the start of July. Recession risk also spiked before again receding. Lots of back and forth.
Through fear and uncertainty, the economy has remained resilient. The labor market is undoubtedly slowing compared to previous years, with average monthly job growth down to 130,000 in the first half of the year compared to 168,000 in 2024. Still, the unemployment rate remains low at 4.1%. Job openings have remained higher than the number of people unemployed and hiring activity has been solid.
Inflation, still a much-debated topic entangled with tariff policies, has remained below 3% for 20 months and currently stands at 2.3%. Wage growth has also outpaced inflation, improving household financial positions. No recession has emerged, and the economy is still growing.
However, uncertainty remains. Many of the economic indicators that are released have been deemed stale because of the potential impacts of policy decisions. This is a key argument for why the Fed has paused rate cuts, citing fear of future inflation related to tariffs. Up to the current date, broad-based inflation related to tariffs has not materialized. Still, tariff policies have also not been settled and remain unknown.
The incoming administration’s policies—new tariffs, immigration changes, and tax cuts, will have competing effects on inflation and economic growth. The Big Beautiful Bill will go into effect soon, and it remains to be seen if the economic growth promised will outpace the increase to government deficits predicted. Rule of thumb: continued high government debt and deficit spending will limit our options in the long term.
In Arizona, the economic outlook is still strong. High tech sectors are continuing to expand and relocate to the state and Arizona is still a preferred destination for residents relocating from elsewhere. Overall, we expect the remainder of 2025 to be a slower year but will maintain steady growth. Homebuilding is expected to be a down year, with an expected rebound in 2026.
“If found on ground, please drag to finish line.” - from a runner’s T-shirt
By: Tina Tamboer with Cromford Report
Written : July 16th, 2025
It’s been an eventful first half of 2025, and at the same time it hasn’t. Economic indicators and Federal Reserve statements set expectations of mortgage rate relief in Q1, perfect timing for the Spring buying season and a turnaround in home sales. Rates dropped from 7.3% in January to 6.6% by April 4th, and contract activity started to outpace 2024; but a recovery wasn’t to be. The announcement of massive tariffs at the beginning of April crushed both the stock and bond markets, sending mortgage rates back to 7.1% and paralyzing both luxury and mainstream homebuyers in their tracks. Fears over potential inflation effects pushed the finish line for the Federal Reserve’s tight monetary policy farther down the road. The buyer’s market that started in November has deepened in 2025, putting home appreciation at the brink of going negative, but not for everyone. Below are the annual price appreciation measures for June 2025:
Overall price measures are flat from last year, but homes under $600K have seen prices decline. Under $400K, single family prices are down -3.8% and condo/townhomes are down -6.8%. Properties from $400K-$600K are down -2.5%. Conversely, properties over $1.5M are up 4.4%. After buyers pulled back in March and April due to uncertainty surrounding tariffs, luxury contracts rallied sporadically in May and June as investment markets recovered. Ironically, Paradise Valley emerged as the #1 seller’s market by the end of June due to high cancellations and expirations. As supply dropped 59% over 7 weeks, buyer demand remained low, but constant, flipping the table. While good for PV sellers, this will only last until October when another round of luxury listings is expected to enter the market.
Projections for the 2nd half of 2025 hinge on 3 major factors: mortgage rates, home prices, and incomes. If mortgage rates do not adjust, then declining home prices and rising incomes will eventually improve affordability and buyer demand, but it will be painfully slow. If rates drop down to the mid-tolow 6% range, then all 3 factors in play will accelerate a recovery. Either way, sales price measures could be down 5%-8% when annual appreciation is calculated at the end of December.
METRO PHOENIX
NUMBERS
$84,320
+ $4,283
+ $3,607
+ $7,363
+ $46,020
+ $18,216
- $2,088
+ $5,146
+ $102,439
- $24,266
DOROTHY HARRISON
dorothy@dorothyharrison.com
