By Mike Bodeen · 24 February 2025
Our residential rental real estate market, both nationally and locally has been stationary over the past 3 1/2 years. In Phoenix metro, we’ve been hanging out at around $1.35 per Square Foot (PSF). Likewise, the median rental price during this time has hovered between $2100 and $2200 per month.
Some are saying that those stationary tenant friendly days are about to change. Phoenix has had a large influx of new apartment construction during this time which has helped our surging population dilemma, but construction may level out, according to a recent Wall Street Journal (WSJ) article.
“The relationship is going to very quickly flip from a renter-friendly environment to a landlord-friendly environment,” -Lee Everett, the head of research and strategy at multifamily giant Cortland.
According to the WSJ article, rising rents would complicate the inflation picture and likely give the Federal Reserve another reason to pause on future rate cuts. Shelter costs account for roughly a third of the consumer-price index, which means that a significant portion of the overall inflation measure is attributed to housing costs.
“It will be very hard for the headline inflation number to reach the Fed’s 2% goal without a slowdown in housing costs,” said Lisa Sturtevant, chief economist at Bright MLS.
“By the end of this year, every major metropolitan market is expected to see positive rent growth,” said Jay Lybik, national director of multifamily analytics at CoStar.
“By the end of this year, every major metropolitan market is expected to see positive rent growth,” – Jay Lybik, national director of multifamily analytics at CoStar.
Locally, rents saw a spike last month to $1.40 PSF (see chart) in the monthly average for our the local leasing market. Now, one month does not a trend make and it’s possible that it will drop back down to the $1.35 level.
Nationally however, there’s a concern that higher construction materials and labor costs will further increase the price of residential home construction including single family and apartments.
We’ll keep watch and fill you in as the 2025 year unfolds.
Mike Bodeen