By Mike Bodeen · 25 July 2016
Valley Renters Still Losing Ground
Rents Rise 7%+ for Past Three Years
According to Michael Orr of the Cromford Report, the average closed lease rate for all Phoenix Metro areas and home types within the Arizona Regional MLS (ARMLS) is 85.1 cents per sq. ft. per month. Last year it was 81.0 cents so that is an annual increase of 5.1%. Two years ago the number was 75.0 cents and in July 2013 it was 69.6 cents. So we have seen rents rise 22.3% in the last 3 years, dramatically faster than the increase in average wages. Consequently, the typical tenant has a lot less to spend on things other than housing.
This situation is very good for landlords and should create motivation for tenants to become home owners. High rents, however, (per Orr) reduce disposable income and so impairs the ability to exercise that motivation to buy. It also reduces the demand for other goods and services. Tenants tend to feel less wealthy than they did 3 years ago unless they have improved their earnings through promotion or job switching. This goes some way to explain why a significant number of people think the economy is doing poorly when almost all the actual numbers are quite positive. Wealth is draining away from tenants but expanding for real estate property owners. With that background it is counter-intuitive that renting has become more popular even for people who can afford to own.
There were 2,998 active rental listings as of Saturday, down from 3,291 on July 23, 2015 and 4,474 on July 23, 2014. In 2008 at this point there were 8,525. Supply appears to be very tight and failing to improve.
Wealth is draining away from tenants but expanding for real estate property owners. With that background it is counter-intuitive that renting has become more popular even for people who can afford to own. (Michael Orr)
Arizona Makes Top Ten for Home Appreciation
To compare the market in Arizona with other states we turn to CoreLogic’s Market Pulse Report to see how prices are behaving. Ranking the states by the year over year change in their Home Price Index we see for May 2016:
1. Oregon 11.0%
2. Washington 10.1%
3. Colorado 9.4%
4. Nevada 7.8%
5. Utah 7.5%
6. Florida 7.3%
7. Idaho 7.0%
8. Texas 7.0%
9. California 6.3%
10. Arizona 5.8%
It’s interesting to note that 9 out of the top 10 states are west of the Mississippi. And the top 5 are all Pacific or Mountain states.
Market data referenced in this article comes from The Cromford Report.