16220 E Keymar Dr – Fountain Hills
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The Rental Market Heating up for Landlords in Phoenix
We’ve shared over the past few weeks how a lack of buyer demand for purchasing a home in the Metro Phoenix area has led to a lethargic (read: S…L…O…W) sales market.
We wrote about a number of reasons why this is happening including student loan debt, (especially the “millennials”) an apprehension about getting “stuck” in a home and mortgage like their family or friends did, and the fact that many of the millennials aren’t leaving home so quickly – hey who doesn’t like “free?”
This rental demand is leading to a rental supply shortage than we’ve seen in a while. For example, in January of this year, the median priced rental listing in the valley was $1095 and the average market time was 48 days
.
This month has seen that median price move up to $1170 and a market time drop to 31 days.
This morning, Jonathan checked on 8 potential rental listings he was going to show a new out of area client today that the client had found on Trulia. Well, in checking the availability and arranging for showings, Jon found that 6 were already rented!
It’s interesting how the current rental market parallels a hot sales market. We find we’re recommending the very same things we do for house buyers:
1) Get pre-approved (check your current credit score and correct any mistakes)
2) Get a good reference letter from your current landlord (hopefully) praising you for what a great renter you were (these are powerful)
3) Be ready to jump on a deal. Don’t be too picky.
4) Get on an automated MLS search going, but check Craigslist, Trulia, Zillow, and word of mouth also. Call Jonathan directly (602-341-9490) to get you set up on an MLS search-no cost or obligation)
One final thought: We’ve been mentioning recently how affordable home ownership is compared to renting. That gulf seems to be getting wider. If you can qualify to buy a home now, it might be a REALLY good move, even if it’s not free.
The Potential Cost of NOT owning a Home
Let’s be honest, many potential and qualified home buyers are not presently shopping for a single family home. They seem to be content with non-home ownership. Renting, as some of them say allows for more freedom. They saw what happened to their parents or friends by getting into a situation they could not easily get out of. (i.e., underwater property, foreclosure) And they don’t like what they’ve seen.
Tough to argue with that one. But make no mistake, there is a downside risk for buyers not buying at this time, and quite honestly, many buyers may regret that they have not acted. Here are some risks:
1) Government Action: I’ll give you one real world example of a consequence for buyers who could have bought 6 months or a year ago and didn’t because the government adjusted downwards the maximum loan amount that would be loaned on an FHA in Maricopa County from $346,250.00 to $271,050. Now many can’t buy in a neighborhood they can afford because of needing a substantially greater down payment. (FHA will provide funding with just 3.5% cash down payment which means that a buyer could have bought a $355,000 home with a lot less cash than is required now with conventional financing. (i.e., 10% to 20% cash down)
2) Home Values Moving Up: The local market bottomed out during the fall of 2011. For 24 straight months, prices increased and have now leveled off. Have they stopped increasing? Well, it’s a risk, but consider that our market is still almost 30% below the peak we reached back in December 2008.
3) Further Mortgage Rate Increases: One year ago, mortgage rates were in the mid 3% range. Today they are averaging between 4.25% and 4.5%. Nuff said.
4) Selection of Homes Could Decrease: Right now there’s a healthy assortment of homes for sale. If sales begin to increase, inventory of available homes will fall, thereby decreasing buyer choice.
5) Rents Moving Up: Landlords are happy with this one. With so many renters, the demand for rentals has increased, thereby increasing average rents.
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123 Main St., Anywhere, CA 90210
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