A sign hangs in the front yard of a metropolitan area that was one of the epicenters of the housing boom — a poster child for the ease of fulfilling the American dream of home ownership.
It reads: “For Rent.”
Apartment occupancy rates in the Phoenix area, and in particular the East Valley, are on the rise. There is a healthy inventory of foreclosed and bank-owned housing inventory for investors to buy, then offer for lease. Many potential home buyers are unable to qualify for a loan.
“Are we turning into a rental community? Right now, we are,” said Tom Ruff, analyst for The Information Market, a Glendale real estate research firm. “In Maricopa County, we’ve had a lot of boom and bust cycles, and this is just another cycle that we’re going through.”
The price of a typical home in the Phoenix area dropped 1.5 percent in January from December and 9.1 percent from January 2010, Standard & Poor’s S&P/Case-Shiller Home Price Indices reported on Tuesday. The latter figure is the biggest drop among the 20 metropolitan areas in the report.
Meanwhile, most Valley areas have apartment vacancy rates of above 90 percent, culminating a comeback from 2010 dips resulting from overbuilding, the slow economy, competition from rental homes and a mass exodus of Hispanics due to state laws targeting illegal immigrants and undocumented workers.
“The data clearly shows that there are submarkets in the Phoenix area that are seeing occupancy rates at their highest in years,” said Tom Simplot, president and CEO of the Arizona Multihousing Association. “If you bought your first house out in Maricopa and it has lost two-thirds of the purchase price, renting looks really good right now.”
Phoenix-area rental housing — both single- and multi-unit — has generated much investor interest.
“I have been in the business since 1995, and I have not seen more buyers in the marketplace with more money willing to stretch (multi-unit) product than what I’m seeing right now,” said Peter TeKampe, vice president of investments at the Phoenix office of Markus & Millichap, a real estate investment firm.
There are 34,119 homes in foreclosure in Maricopa County and 20,141 bank-owned properties, according to Information Market data — a large market for investors.
While the number of available rental homes is unclear, TeKampe said, “It’s safe to say there are more single-family homes out there as rentals than Maricopa County has ever seen.”
The Standard & Poor’s S&P/Case-Shiller numbers were not surprising to Ruff, who said that national real-estate analyses tend to lag a few months behind local ones. He was pessimistic last summer but is seeing positive trends, such as a foreclosure number that is down more than 6,000 from July.
According to The Information Market, the median home price in the Phoenix area is currently $116,500, a number Ruff expects to tick up next month.
“While the consensus elsewhere is that we are still heading to the bottom, we believe we’re bouncing off the bottom right now,” Ruff said. “If you’re talking about buying against renting, it’s a great time to buy when your payments are less than what you pay in rent. That’s a no-brainer. If you can afford it, it’s a great time to buy.”
When people currently unable to get a home loan qualify again, Ruff said, another buying surge will likely occur.
Still, some analysts believe that renting will continue as a popular option, especially if gas prices force people to reside closer to where they work and play.
A recent report in Sustainable Communities magazine projected that, to meet demand, half of new homes built in the U.S. before 2030 will need to be rental units.
“Just a couple years ago, if you turned on the TV late at night, you’d see all these infomercials about how everyone had to own real estate,” TeKampe said. “It was almost socially unacceptable not to.
“Now, people are accepting being a renter. Renters have a lot of conveniences that a homeowner doesn’t. The disposal isn’t working properly, you call the manager’s office, and they come and fix it. People are renting for convenience, and people are re-thinking home ownership.”
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