Phoenix Single-Family Rent Prices are Up, Up and Away

Rising rental rates have been a recurring theme in Phoenix real estate headlines in recent years. This is especially observable across the single-family home rental market. The prospect of increased rents excites investors and disheartens tenants.

In the 6 years between July 2013 and July 2019, single-family rental rates around Greater Phoenix increased by nearly 45%.

From 2005 to 2013, single-family rental rates per square foot were flat and range-bound between $0.63/sf and $0.70/sf per month. That time period covers both the run-up to and the collapse of the housing market.

In 2014Q1, rental rates suddenly accelerated and (except for minor seasonal adjustments) have not retraced. As of August 2019, for all areas of the Phoenix metro, single-family homes are leasing for an average of $0.98/sf per month. Generally, larger homes rent for slightly less than the average and smaller homes rent for more. The figures do not include vacation homes or short-term rentals.

One contributing factor for the rise is the pressure from the rapidly growing population in the Valley. Over 200 people each day are moving to Maricopa County.

Phoenix landlords are big winners. The increasing rental rates have been a boon for private equity firms like Blackstone and its subsidiary Invitation Homes. Invitation is one of several single-family rental mega-operators that were actively purchasing homes at bargain prices in Phoenix in the aftermath of the housing crisis. As of August 2019, Invitation Homes now owns 7,600 single-family rental properties around Phoenix. These well-timed investments have appreciated not only in terms of monthly gross income but the underlying assets have also grown in value.

Blackstone recently spun off a large stake in Invitation Homes in May 2019. Watch my interview with Invitation Homes CEO, Dallas Tanner here.

Here is a look at the current single-family rental inventory offered by Invitation Homes in Phoenix and a sample of current rental rates.

It is unclear if the rental market rates in Phoenix will continue to climb. Inventory of single-family homes for sale is extremely tight and home builders struggle to keep up with the demand for affordable homes. If those two factors remain intact, sidelined homebuyers who can’t find the right homes for sale and who don’t want a multi-family environment will be falling back on single-family rentals for the foreseeable future.

The graph above was compiled by Michael Orr’s Cromford Report with data from ARMLS.

We had an apartment on west side of Central Park. The rent was very reasonable. We found out later that it belonged to a gangster called Legs Diamond and it was a front to his headquarters. It was fine. – James Stewart, American actor and star of It’s a Wonderful Life