With the sluggish Single Family (SF) market currently in place in the Phoenix Metro area, builders have slowed on SF construction and instead have been focusing on the Multi-Family market.
Michael Orr’s Cromford Report quotes the following:
“Multi-family permits were strong again in May 2014 with a total of 757 units for Maricopa and Pinal Counties. The permit numbers were confined to the 3 cities of Phoenix, Scottsdale and Tempe. The count of 757 is lower than the previous 3 months but the annual average has increased to 6,992 units. This is well up from the 4,792 we saw in May 2013. The “Blue Chip” consensus forecast for multi-family permits is currently 6,172, up from 5,906 three months ago. This is still looking too low and a 2014 total over 7,000 appears increasingly likely.
Phoenix (2,648), Scottsdale (1,933) and Tempe (1,698) are responsible for 6,279 (90%) of the total of 6,992 multi-family units permitted over the last 12 months. Chandler (446) is the only other city with a significant number of permits. All the other cities and county areas contributed less than 4% of the total.
Permits are reflecting a strong swing towards rental units and away from homes to purchase. This is also happening in the rest of the market so is unsurprising. The unknown question is how long this trend will continue.”
We’re seeing another market correction that attempts to fill the vacuum caused by the consequences of our hot rental/slow resale market. Rents will continue to increase, which landlords are thrilled about and renters not so much. This often gets the resale market in gear when people can actually see that home ownership is more cost effective than renting.
On that note, due to the continued sluggish economy, mortgage rates have been dropping again, now down in the low 4% range for the typical 30 year fixed rate product.