By Mike Bodeen · 22 November 2021
If you’ve been a Mike’s Snapshot follower for a while, you’ve probably noticed that we’ve been tending to write more about the local rental market lately, especially this last year. There’s good reason for that. As the Phoenix rental market goes, so goes the Phoenix residential sales market.
I’d like to take credit for that observation, but really, the credit goes to The Cromford Report which supplies the most amazing residential real estate stats anywhere on the planet. And that is not real estate puffing! Our smarts are to fork out the subscription bucks to have access to it and reference it.
For example, Cromford recently pointed out in a daily update a blurb about the activity of investors in our local market. Referencing an article from the John Burns Real Estate Consulting Group, they pointed out that in the U.S. this past year, rents have increased an average of 6%. In Phoenix, however, rents increased 14% year over year (YOY), the highest of 63 metro markets analyzed in the U.S.
https://www.realestateconsulting.com/the-light-bsfri-new-lease-effective-rents-up/
Cromford then explains why “investors are extremely interested in purchasing single-family homes in Phoenix.” So, rent receipts are rising faster than anywhere else because there are more people looking to rent than there are rental properties available. The pandemic, they note, may be an influencer towards families preferring single family detached purchases from condo/apartments. Because of this, investor demand is not likely to cool and because of the number of investors in the marketplace, we can expect “investor demand to remain robust, which in turn prevents the market cooling down as it would if ordinary home buyers were the only source of demand.”
Cromford in the past has pointed out that perhaps the first sign of a cooling appreciation market would be a fall in rental prices, brought on by a drop of rental demand. And with the continued strength of new residents arriving in Arizona, particularly, Phoenix and Tucson, it’s not likely to happen anytime soon.
In my way of thinking, and yes, I own rental property, I can see why investors are willing to overpay today because next year, or in two years, they’ll look pretty smart!
The following chart is worth ending this article😊
Market data referenced in this article comes from The Cromford Report.