The rental market is the real estate version of the canary in the coal mine. It’s going to show the first signs of change. Think about it. As prices go up, wealthy people will buy few houses; well-to-do people will by smaller houses; starter home people will rent, and renters will get roommates. So the recent changes in the rental market may be signaling that we have reached a peak in the madness that is the Phoenix real estate market.
Not all rentals are listed in the MLS, but for those that are, here are some interesting trends:
*Rental rates have been fairly flat since Q3 2021.
*Supply of rentals is up 39% compared to last year
*New listings are up by 26% in the last 4 weeks
*The supply of single family homes is up 99%! (1546 currently vs 777 last year).
One of the big drivers increasing real estate prices is the cash buyers amassing their portfolios of real estate rentals. Some of these institutional buyers own thousands of homes in Metro Phoenix. They paid a pretty penny for them too, with a cavalier “how much will it take to win this bidding war” attitude with their multi-million dollar war chests. So what happens if rental income decreases? What happens if homes remain vacant? Hmmmm…maybe they…sell some of them?
And iBuyers like Zillow and Opendoor, maybe it’s not so easy for them to bulk sell to investors. Maybe they need to sell to consumers who just want a place to call home. A shift in investor behavior might bring some much needed inventory to the market and slow this out-of-control price train down. Wouldn’t that be groovy?
