What is going on with RENT PRICES in the Phoenix Metro area?!
What is going on with RENT PRICES in the Phoenix Metro area?! Let's take a look at the numbers.
Hello everyone and welcome to a new edition of Merrill's Monday Morning Market Madness coming at you with an update of what's going on in the Phoenix, residential housing market, in particular, today, we're going to take a look at the rental market. We don't typically spend a ton of time talking about the rental market, but I want to dive into some of those numbers.
First, as always, we're going to start by taking a look at the month's supply of inventory numbers. Essentially. How many homes are currently for sale? Versus how many homes are selling to give us a sense of the supply versus demand. So right now, in our MLS, we have 6,653 active listings. Last Monday, there were 6,507.
So we're up 150 active listings over the past week, meaning that 150 more homes have come on the market than what has sold. So, inventory continues to increase, Which is making the market slightly less competitive. But again at that pace, let's say we add 150 listings a week. Every single week. We could add that for a year, 150 more listings for a year, and still, be in a pretty strong seller’s market.
So it is moving in a more balanced direction, but we still have a very long way to go. There are 11,638 homes currently pending only 8,602 have closed in the past 30 days. So that number is a little bit lower. So the number of homes closing over a 30 day period is falling and the number of homes coming on the market is rising.
And then lastly, the month's supply of inventory. With 0.77, which is also the highest number that we have seen. So, again, a balanced market would probably have a month's supply of inventory around four to five months supply. So we're still at 0.77, but we were as low as 0.48 or something like that.
So, so it's moving towards more balance, which I think unless you're a. I think everyone wants a little bit more balanced, even homeowners, like to know that it's just not, the values are still going up and, and all of that, but it's not an absolute frenzy because people feel like a frenzy isn't sustainable.
So let's, we'll continue to keep an eye on it and see you where it goes. And obviously, I'll continue to bring you these numbers and try to be as transparent and open and up and upfront with you about what the market is doing and what direction we think it is going to hit. We're still seeing multiple offers on most homes though.
So like yesterday as an example, I was out showing homes to a client, in the Gilbert area around 450,000 ish and, all six homes that we showed had multiple offers and all six of them had multiple offers above list price. So, so I really don't want to paint a picture of like, the markets totally.
He, you know, no, it's still crazy, but instead of 20 offers on every home, there are three or four offers on most homes. So, in fact, I took a look at the homes that have sold in the past 30 days. The sold to list price ratio is still 103%, meaning that on average sellers are getting 3% above the list price, which is pretty significant when you consider that the average sales price is now.
Over, you know, it's around 500,000 for the, for our MLS. So on average sellers are getting an extra $15,000 above what they are asking. average rates dropped slightly last week. Average mortgage rates are at 2.8, 8%. So rates are still staying very low, which is helping with affordability. And that will continue to help with, you know, the buyer side and, and adding demand.
I've always. If there's going to be one thing that would really trigger a massive slowdown in our market, it would be rapidly rising interest rates. If rates rose tomorrow up to four or 5%, suddenly affordability becomes a huge, a bigger, even bigger factor than it is now, which obviously affordability is already becoming a big factor.
It's getting very, very difficult for first-time home buyers. Especially in Maricopa county, if you want to look a little farther out into, into Pinellas county and even, even like Maricopa and San tan valley are quite pricey, we're seeing more and more first time home buyers going to places like Florence, Coolidge, Casa Grande, and places like that.
So, prices out there are, Casa Grande with lucid and everything. It just feels like it is exploding now. So anyway, as promised let's jump into the rental market. So what I wanted to look at is what have average rents been done over the past decade and in order to make sure that I'm comparing, trying to keep the numbers as, as a fit.
As possible, I decided, you know what, let's look at what a typical rental rented for over the past 10 years. So what I'm looking at is a single-family home built after 1980, single-story, three to four-bedroom, two to three bathroom between 1200 and 1800 square feet. Not in a 55 plus community, no pool.
So just kind of looking at, you know, some of those, just a very normal, typical, regular single-family house, in 2007. The average rent for a home like that was $999, man. Don't you wish you could go back and rent one of those or buy a bunch of them? Then by 2012, it became $1,031. So average rents only rose by $32.
Then the next year was $1,023. So again, rents went up about 20 bucks than to 2014, it was $1,053. So rents went up another $30 a month. Then by 2015, it became 1125. So between 2011 and 2015, average rents went up by what is that? $126 over a five-year period. So not. Not at, not at a horribly high amount. I mean, no one wants to pay more, but that's, that's pretty doable.
Then the next year it went up to $80 a month to 1209 and another $80 to 1292, then another $80 in 2018 to 1373. So you see, we have this pattern where they were going up 20 to $30 a month each year, then all of a sudden it started going up to $80 a month each year. And then in 2019, it went up to $120. An average rent from 1373 in 2018 to 1496, was about $1,500.
Was the average rent and by the way, sorry, one more. This is for all of Maricopa and Pinel county. So these numbers seem a little low, keep in mind that this includes Coolidge, Florence, Arizona City, Eloy, you know, some of these outskirts where the rents are a little bit cheaper so I included all of Maricopa and Penelope.
By 2020 average rents increased by what is that? $130. It went all the way up to 16, 16 a month. And then so far in 2021, the average rent is $1,838 a month. which is an increase of $222 a month just compared to last year. And by the way, that's just so far this year by the end of the year, that will be.
It might hit 1900 rents are absolutely skyrocketed, many, many tenants. If you're renting, you already know your rent has increased by, you know, you've had to sign a new lease. Your rent has maybe gone up to three, $400 a month. So rents are absolutely skyrocketing. Put this another way. In all of Chandler and Gilbert in the MLS, there are currently only three homes for rent below $2,000 a month.
And the cheapest one is $1,900 a month. so, so rents are absolutely skyrocketed. And that will continue to skyrocket because they're having the same supply and demand problem that the sales market is having. So what does that mean? Well, your renter, it means that it's still more affordable to buy than it is to rent.
So if you are able to buy, let's say, talk about it and see if we can get you into a home. I know it seems like prices are high on the sales market, but tell you what they're nothing compared to what the rent prices are and what they're going to continue to do the best part about buying a house is you get to lock it in no more.
Right. You, you get that 30-year mortgage and now your payment on it is fixed. The only thing that can fluctuate slightly is the property taxes and insurance and they're certainly not going to almost double from 2011 to 2021. We've seen almost double average rents, you know, in just 10 years.
So can you afford for your rent to double over the next 10 years? I think that would be a thing to look at and if you're not a renter. Have you considered investing? Because rents are fantastic right now they're rising demand is insanely high. You're not going to be dealing with a lot of vacancies for the most part.
As long as you're pricing your properties correctly, they're all going to get rented out and moved in very fast. And, you know, we've been having great experiences with all of our rental properties and I'd love to connect with you and see if I can help you pick up a rental or two or three, or however many you feel like you need.
But, it's an incredible thing to have in your portfolio right now, you know, real estate prices are rising rapidly. Rents are rising rapidly, so you're getting an incredible return. Anyway, that is it for this week's show. I hope you found this information. If you would like more details or if you have any questions about anything that I talked about today, please feel free to hit me up.
Thanks so much.