The Phoenix multifamily market showed signs of recovery in Q3 2024, as easing inflation and rising consumer confidence boosted renter demand and household formation. Despite new supply continuing to outpace leasing, the decline in occupancy is slowing, suggesting property performance may improve over the next year. In the past year, 18,000 units were absorbed, far surpassing the pre-COVID average of 7,200 units. This absorption was largely due to the lease-up of luxury complexes, with midpriced communities also seeing a notable boost, absorbing 4,900 units and pushing metro-wide vacancy only slightly higher to 11%.

However, the surge in new construction remains a challenge, as builders delivered 22,000 units in the past year, with another 27,000 units underway, representing 6.8% of existing inventory and making Phoenix the sixth most aggressively built apartment market in the U.S. High-end properties face more vacancy pressure, with a 600 basis point increase and a 5% rent decline, while workforce housing saw a smaller rise in vacancy and a 1% rent drop. Elevated vacancies and increased competition have driven rents down by 2.4% over the past year, with many communities offering concessions to attract renters. Looking forward, vacancy is expected to peak in 2025, with rent growth likely taking longer to recover as the market absorbs excess supply.

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