This Could Be Bad for AZ Investors
Zumper's latest survey of rents in the top 100 cities in the U.S. shows that all 6 cities on the list had year-over-year (YoY) decreases, except for Glendale.
Scottsdale, AZ led the pack with a 7.90% YoY decrease in 1-bedroom rental prices. But Glendale had a 3.0% YoY rise in rents.
This can be seen in the table below.
The table above also shows that month-over-month (MoM) rental prices have been declining in Scottsdale, as well as Mesa and Tucson.
Scottsdale rents are still the highest in the state. The average one-bedroom costs $1,740 per month. The rents in Glendale are the second highest at $1,690 per month.
Scottsdale and Phoenix Declines - Prospects for Investors
Given that rents in Scottsdale have been falling and those in Glendale are rising, the two averages are starting to converge.
This could be due to large numbers of new housing supply coming online or due to come online in Scottsdale in the near future.
It could also be due to a slowdown in sunbelt travelers to Scottsdale in September a seasonable occurrence.
Nevertheless, the huge 7.9% fall in the past year in Scottsdale could be due to rents adjusting to non-Covid conditions. In other words, it may not be indicative of future decreases.
However, these types of decreases are extremely rare. The CEO of Zumper, Anthemos Georgiades, said that there’s a very real possibility of year-over-year decreases on the horizon.
That could spell trouble for investors.
“If the current pattern continues, we’ll likely see negative year-over-year growth by the end of winter,” explains Georgiades. “Demand remains soft while a record amount of supply is hitting the market, creating a lot of uncertainty and distress throughout the real estate industry—especially for companies and individuals that invested heavily in multifamily developments over the last five years.”
Moreover, Phoenix has experienced month-over-month declines in one-bedroom rents in four out of the last six months, according to Zumper. Moreover, it has had year-over-year declines in the last three months.
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