Carrick Sears, Danny Lee, and Royden Hudnall provide an abstract on the Metro Phoenix Multifamily Market during the start of 2022. Click on the link below for the full Multifamily Newsletter!
Carrick Sears, Senior Advisor;
“Our May Metro Phoenix Multifamily Dashboard shows just how HOT our market is and reveals each submarkets performance for quick reference. Overall rents are up an astounding 24% this year. Sales prices per unit averaged $278,000 in Q1, up 32% over LY. Our population increase is driving our market and demand continues to outpace supply. Development activities are facing some headwinds from labor shortages, supply chain challenges and inflation. Luckily a rising rent environment allows many developments to still pencil out. The recent rare half point interest rate hike by the Fed is a double-barreled effort to reduce inflation that is running at a 4-decade high. The last half point increase was in the year 2000. Rising interest rates are likely to put some upward pressure on cap rates in 2022. However, the rise will be modest compared to the increase in the benchmark 91-day Treasury that has already increased by 1.3 percentage points as of the end of April from one year ago (2.7% as of April 26). This is because other factors are creating upward pressure on commercial real estate prices. The apartment market is likely to benefit from the higher mortgage rates due to increased demand for rental units as home mortgages become out of reach for more people. So despite rising multifamily mortgage rates, rising rents should more than offset this negative factor. Interesting times for sure, and it is wise to keep some liquidity and be diversified to some extent. Reach out today for a portfolio check-up!”
Danny Lee, Senior Advisor;
“The market in the first quarter of 2022 is strong and brisk in terms of transaction velocity. We are a seeing a high demand with low inventory.”
Royden Hudnall, Advisor;
“After an unprecedented year of price increases in 2021, we are off to another hot start in the 2022 Phoenix Multifamily market. Multifamily assets have never been worth more than they are currently valued throughout the valley. Price per unit is up 32% to over $278k/unit. One of the potential headwinds of the market going forward is affordability. Rents have seen unprecedented increases over the past year and a half and the average rent per unit is up $328 year-over-year. It’s anyone’s guess how long this can continue but there are over 29k units under construction in Phoenix and the vast majority of these units are class A. This should push up the vacancy of Class A units throughout the valley in the long term while increasing the demand of affordable units. Phoenix is still an affordable market compared to most west coast market’s and it is important that Phoenix maintains that reputation. The biggest demand driver for Phoenix right now is the 90k people that are moving here per year from pricier markets. If Phoenix can maintain its reputation as an affordable market and continue to drive inward migration, we have a bright future ahead.”