Phoenix rental market update

There is no question; the state of our economy in the past six or so years has Arizonians choosing to rent homes or apartments rather than buy.  With the ugly onslaught of foreclosures and insane drop in home values, it is no wonder Phoenicians would much rather enjoy the financial safety of renting rather than face massive financial losses or run the risk of losing their home if faced with a job loss.

This all being said, rental units are now harder to come by than they have been in over fifteen years.  The rules we learned in economics 101 never fail. The promise that a smaller supply paired with a greater demand inevitably means higher prices.  That is exactly what we are seeing in today’s rental market all around the valley.

Case-Schiller reports indicate an average 9% increase in rental rates in the Phoenix-metro area from this time last year.  Ouch! The greatest concentration of this increase is in the more central areas of the valley, such as central Phoenix, Scottsdale, and Paradise Valley.  When the market was booming many chose to buy homes in suburban areas such as Buckeye, Surprise and Queen Creek because these homes are brand new, massive and prices were extremely low, relative to those for sale closer to the heart of the valley.  Buyers were willing to sacrifice a long commute in order to live in a suburban McMansion in a shiny new neighborhood.

When the market crashed in 2006, these outlying homes were the first to plummet in value, and they plummet the hardest.  Homeowners being so far upside-down on their mortgages or unable to make their monthly payments due to a job loss turned to renting. With no real reason to make that long commute from the suburbs into the city, the cities are seeing a huge contraction of renters wanting to live closer to their work.

All in all, beware when the time comes to renew your lease. You may be facing a bump in rent prices.  See if you can negotiate beforehand to try to keep your costs down and not have to deal with the headache of moving because your place is no longer affordable.