8 PHOENIX RENTAL MARKET TRENDS TO KNOW HEADING INTO 2025

LIVING IN PHOENIX, ARIZONA

 

8 Phoenix Rental Market Trends To Know Heading Into 2025

 

As the new year begins, we’ve gathered the Top Reports of 2024, showcasing the trends, surprises and standout moments that shaped the U.S. and Phoenix rental market.

Historic Highs In Apartment Construction

2024 is a record-breaking year, with U.S. apartment completions surpassing 500,000 units for the first time. Despite market uncertainties slowing new starts, the future looks bright, with 2 million units projected by 2028.

In Phoenix: The Phoenix metro is expected to welcome 20,141 new units by the end of 2024, while Phoenix proper leads with 7,389 units. The metro area is projected to increase its pace of construction with 60,833 new units anticipated by 2028.

Bigger Apartments Are Back

After a dip in 2022, the average new apartment size rebounded to 916 square feet in 2023 thanks to a rise in spacious two- and three-bedroom units meeting renters’ need for more space. The average apartment size in the U.S. increased by 27 square feet from the previous year.

In Phoenix rental market: New apartments in Phoenix offer an average of 846 square feet, following a 61 square feet upgrade.

Renter Favorites Revealed – 1st Half Of 2024

We looked at engagement on RentCafe.com through listings views, as well as favorited apartments and saved searches to have a more in-depth interest of renters. Additionally, we factored in rentals availability in the city, for a closer look at demand fluctuations year-over-year for monthly snapshots of renter market dynamics.

In Phoenix: Phoenix is the 81st most sought-after city by renters in the first half of 2024.

Year-End Rental Market Competitiveness Report

In 2024, there were 9 applicants per vacant unit, which stayed on the market for 40 days. The average occupancy rate was 93.6%, while the lease renewal rate increased year-over-year to 62.2%. Furthermore, the rentals inventory grew nationwide by 2.59%. All these metrics combined resulted in a Rental Competitiveness Index (RCI) score of 74.4 (out of 100).

In Phoenix: In 2024, in Phoenix there were 8 renters vying for the same vacant apartment, which was rented out in 42 days, on average.  RCI score 66.

Build-To-Rent On The Rise

Build-to-rent housing saw a major surge in 2023, with 27,500 homes completed (a 75% jump from 2022). Looking ahead, over 45,000 build-to-rent homes are currently under construction.

In Phoenix rental market: Not only did Phoenix add over 4,000 build-to-rent homes in 2023 alone, but it quadrupled its inventory in just five years’ time. Moreover, the future of BTR in Phoenix is brighter than ever as more than 7,200 houses for rent are underway in the metro, setting a new national record.

Adaptive Reuse On The Rise

The adaptive reuse trend gained momentum, with 12,700+ buildings converted into apartments in 2023. Hotels were the top choice for conversions. With 151,000 apartments currently underway, this revival shows no signs of slowing down.

In Phoenix: Phoenix is witnessing an office-to-apartment conversion boom, planning to deliver more than 850 units through this type of transformation. There are currently 1,333 apartments set to be created from adaptive reuse projects in Phoenix and delivered in the upcoming years.

More Space For $1,500

Renters across the U.S. can expect an average of 729 square feet for $1,500 per month, but in 62% of the 200 largest cities, you’ll find even more room. Cities like Wichita, KS, offer exceptional value, with $1,500 getting you 1,359 square feet.

In Phoenix: For $1,500 a month, renters in Phoenix can secure 793 square feet, among the smallest space in Arizona.

How Much Does Gen Z Pay On Rent Before 30

When it comes to housing costs, Gen Z will be spending $145,000 on rent by their 30th birthday, while Millennials spent $127,000 during the same stage of life (14% more). Notably, Gen Z’s renting costs account for 27% of their income from ages 22 to 29 (which is the same percentage as it was for Millennials) because Gen Z’s wages are higher today. They will earn a total of $550,000 in their 20s.

In Phoenix: Gen Zers in Phoenix shell out $150,912 just on rent by the time they hit 30. Owning a home in Phoenix costs $175,649 (excluding the down payment). By comparison, Millennials in Phoenix spent $126,190 on rent and $182,568 to cover the mortgage, taxes and fees on a house in their 20s. At the same time, Gen Zers’ income is anticipated to surpass Millennials’ earnings in this eight-year period amounting to $562,432.  – more at azbigmedia.com