Last week we reported on apartment rental trends from some large cities in the U.S., keeping an eye on how rental and vacancy rates are weathering the volatile real estate market. Apartments in Phoenix are of particular significance to the nation’s rental market because of how hard the housing and credit crunch hit the region; we can now compare predictions to what has actually happened.
Marcus and Millichap’s 2008 National Apartment Report expressed cautious optimism for Phoenix apartments at the outset of the year, citing strong population growth and uncertainty in the local housing market driving renter demand.
However, the nagging possibility of the shadow rental market’s effect on apartment rentals was still unclear, which led to the metro’s drop of seven positions on the National Apartment Index.
Halfway through the year, it is becoming apparent that the shadow rental market is has indeed increased viable rental inventory and have depressed prices of apartments in Phoenix. As we reported last week, Phoenix apartment rental rates have dropped 9.3 percent.
MyNewPlace internal search data also backs up the new information regarding the popularity of homes for rent in Phoenix. Searches for single family rental homes in Q1 and Q2 were three times higher than our national average for the first half of 2008.
Thus, we have seen, in the Phoenix rental market at least, that the shadow rental market is supplying useful rental inventory. Homeowners who have been foreclosed on seem to have opted to stay with single family homes, the only difference is that rental rates are affordable whereas mortgages are not.