By Roland Murphy for AZBEX
A recent article at RealPage raises concerns about the pace of cooling in the Phoenix multifamily market and assigns the reasoning to some outlier-level data reviews that have not often been talked about.
Market reviewer Jay Parsons noted no other market is decelerating as quickly as Phoenix in terms of rent growth, then he checks of four “jarring” statistics:
- Phoenix occupancy rates have fallen every month in the five-month period ending in August and are now at 94.4%, the lowest rate since 2017;
- The lease renewal rate in July 2022 was just 47.2%, down from 56% in July 2021. Both the final rate and the year-over-year decline were the lowest in the nation, according to Parsons;
- In July, Phoenix fell below the U.S. average year-over-year effective asking rent growth rate for the first time since 2013, and
- Renters’ incomes have stagnated in Phoenix, even though they have increased significantly across the country.
The article claims the standard answer of, “It’s a supply issue,” doesn’t really hold water, since other markets with similar supply issues are not seeing the same pace of deceleration Phoenix is. According to RealPage’s data, “Among top 50 sized metros, Phoenix ranks eighth with a 3.2% inventory expansion rate in the last 12 months. And based on projects under construction, Phoenix ranks sixth with a 10.5% future expansion rate.”
It goes on to note the biggest slowdown is in the Class C sector, which is significantly less expensive than new developments.
Despite the regular ballyhooing about Phoenix’s blistering pace of in-migration, Parsons cites some multifamily owners who claim the pace slowed dramatically in 2022 and that “some” who relocated to Phoenix in 2021 and early 2022 have since left again. He also notes Redfin data on housing demand trends that indicate lower household formation. He does not make any attempt to corelate these points against in-migration as opposed to the rapid increase in mortgage rates and resulting affects on for-sale housing supplies.
Parsons also claims “stalled momentum” in the Phoenix job market, noting that while unemployment is still low, it has trended upward since bottoming out at 2.4% in March.
Parsons concludes his report by writing, “Going further back to the start of the pandemic, Phoenix has expanded but at a notably slower pace than its Sun Belt peers across Texas and the Southeast – perhaps a sign that Phoenix’s blistering growth pace in home prices and apartment rents was less sustainable.”
The article did not give any numbers to support that claim, and given Maricopa County’s ongoing status as the fastest growing in the nation, the claim of “notably slower” has to be filed as “dubious.”
It is good to consider new hypotheses and theories as to what may be causing changes in the market, but it looks as though RealPage and Mr. Parsons may be overreaching more for the sake of having something to say than to say something meaningful.