Phoenix Rental Market Changing

In several media reports, the rental market is said to be softening nationwide and we can certainly see some evidence in the local ARMLS data, even though the bulk of rentals are not handled through MLS listings. Landlords tend to use the MLS for more unusual rentals where clients can be more difficult to locate. This means they are usually skewed towards more expensive homes, and far more single-family detached homes are listed than apartments or condos.

The ARMLS data represents a small sample of what is available overall, but still provides us with useful data on what is happening in the rental marketplace.

Over the last 4 weeks we have seen a flood of new listings, with 66% more being added (2,952) compared with the same period last year (1,769). Clearly prospective tenants have far more choice with 3,445 active listings, the highest count in the last 7 years. This is up a massive 157% compared to this time last year. Something big is going on.

There is also a clear downward trend in the rents that are being advertised - currently the average is $1.55 per sq. ft. per month. This is down from $1.60 last month and $1.65 in mid July.

The rent for closed leases has been flat over the past 14 months, stuck at about $1.35 to $1.40 per sq. ft. per month. We anticipate that competition among landlords for the remaining prospective tenants is going to lead to more incentives and concessions. Once that these have worked through the system, actual rents for signed leases may start to decline.

This would be very helpful in lowering inflation and in turn this might encourage the Federal Reserve to stop raising interest rates. Although a 6% mortgage rate may seem quite low to people as ancient as me, who bought their first home in the mid 1970s, most people below the age of 40 consider it outrageously high.

As pointed out in the Cromford Daily Observation above, the MLS is a limited resource for rental markets; tends to be weighted to the more expensive single family detached homes for rent.

That said, there is a Cromford Tableau Chart where we can sample select Valley city rental data. 

You can see that the charts below allows us to filter down to average lease price by zip code and price range. 

However, again, because the MLS is a limited resource for rental properties, smaller cities and / or filtering gives us schizo looking graphs.

Below, with the unfiltered broad brush in larger Valley markets, including all property types, we do see the softening referred to above. 

Phoenix ~

Scottsdale ~

Gilbert ~

Peoria ~

Takeaway ~

The rental market is softening.