By Mike Bodeen · 27 July 2020
The cost of housing in the Phoenix Metropolitan communities continue to ascend, both in purchase and rental prices. Today we’re comparing the local rental and resale markets on a Monthly Average Sales price and lease price per square foot (PSF) basis. Next week, we’ll look at the 3rd leg of our local housing market – new homes, to see how that’s morphing upwards as well.
Both of our charts go back to and include June of 2011 which, for sales was the 21st century bottom of the market at $83 PSF. In that same month, the lease PSF was .70 cents PSF. What happened since then? A couple of pictures are worth a couple of thousand words!
For rental prices, from September of 2005 until February of 2014 – 9 years , the residential lease price PSF would be very stable (read: flatline) until February of 2014. Then began the Everest climb. (see chart below)
Why was there such stability with little to no rental price rises from 2005 until 2014? A few things at least. Phoenix’ Population was increasing, but builders were meeting the growth challenge. New home construction was on a tear, adding up to 58,000 new homes at one point. And, as homes began to appreciate, investors were snapping them up and renting them out.
2014 began the spike in rental prices as seen on the chart as builders, burnt by the housing market collapse, completely retreated. While there has been enthusiasm with builders lately, they have not begun to build in anything close to the kind of volume they were doing before the crash.
From June of 2014 until now however, rental prices have grown to $1.10 PSF! This is a 57% increase, or 9.5% per year! Anything but stable…
Regarding sales prices, in June of 2011, the average Phoenix metro sales price PSF was only $83. Now, in 2020, the average sales PSF is at $183 – a $100 PSF price rise, or, a 105% PSF increase.
Some think that because we’ve hit these recent highs, that the acceleration is bound to slow, stop, or drop. Of course, all things are possible, and we’re currently seeing a lot of things happening, but to that we ask, “what evidence do you see to support that view?”
On the contrary, the evidence of supply and demand, low interest rates, and perhaps an increase in migratory trends, seem to point to continued growth in sales and lease pricing.