With the downtrend in home-buyer demand approaching the one-year mark, Arizona State University declared this week that the metro Phoenix housing market is officially in a slump.
Demand for rental homes, on the other hand, has remained steady and strong.
Today, the Valley boasts about 230,000 single-family rental homes — an 81 percent spike since the 2006 housing boom, according to Michael Orr, a housing expert with ASU's W.P. Carey School of Business.
That explosive growth has raised major concerns that the local rental home market is getting dangerously close to being over saturated, especially last year when investors were still furiously buying homes at a bargain.
But a year later, rental home demand has yet to show any signs of tapering. In fact, there aren't enough rentals to meet demand, according to Orr's monthly housing report for June released on Monday.
There were about 4,200 rental homes Valleywide available for rent on the Arizona Regional Multiple Listing Service, up 36 percent year over year, the report said. Rental rates have thus gone up about 6 percent during the same time frame. A 1,500 square-foot home would cost $1,080 per month on average, although it varies widely by location. That is up from about $1,000 last year.
But Orr said the rent increases have yet to dissuade tenants.
"It’s kind of the opposite of what a lot of people predicted," Orr said. "We still don’t have enough because a lack of demand for homes to buy, we’ve got too many people still wanting to rent. All of those rental homes are kind of staying out the market for purchase and just going through the rental market, and that’s pretty busy. Prices are going up, occupancy is very high.”
Orr said this trend really shouldn’t be surprising. Thousands are still recovering from a foreclosure or short sale and, according to a study released on Tuesday by the Urban Institute, more than 38 percent of Arizonans have some kind of debt in collections. So even if they wanted to buy, it’s almost impossible for them to get a mortgage by today’s incredibly tight underwriting standards.
"There’s a lot of people who can stumble when they make a loan application and getting a lease is much easier than getting a mortgage," he said.
Orr said he expects more renters will start buying homes again in bigger numbers starting next year.
But until lenders start loosening their purse strings, buyer demand will only trickle back and the rental market will keep forging ahead.
