In some Phoenix cities, Rental Rates have increased by more than 15% in the past year
Both the housing and the property rental markets have been on fire in the past year and there seems to be no slowing down in sight. The increases in both markets have created an urgency for some to either buy a home to lock in a long term fixed payment or to sign a one year lease agreement to lock in Rent for at least the next 12 months. With the increases in the apartment and home rental market over 15% in the past year in some areas, locking in ones housing costs appears to be a smart idea.
With rents increasing 15% or more in the past year in many local Phoenix area cities, staying in an apartment long term no longer seems like a smart financial decision. Many renters I have talked with over the past year are more motivated than ever to leave their apartments behind because of the exorbitant rental increases they are being subjected to. I hear many stories of rents increasing by $200 – $500 per month depending on where the apartment is located which is tough to absorb when incomes most of the time don’t increase at the same pace.
If the average rent in your area for a 2 Bedroom apartment is $1,500 per month, you are paying, not investing:
$1,500 x 12 = $18,000
$1,500 x 24 = $36,000
Now, I understand paying rent when you are young and just getting on your feet financially. But paying rent anything beyond five years if your employment is stable makes no sense financially and I would strongly advise taking steps now to plan and budget so you can prepare to buy a home in the not-too-distant future.
Let’s look at some of the rental rates in the Metro Phoenix area and how much they have increased in the past year:
Scottsdale
2 Bedroom
$2,500 per month, up 19% in the past year
Gilbert
2 Bedroom
$1,800 per month, up 18.4% in the past year
Chandler
2 Bedroom
$1,660 per month, up 15.3% in the past year
Tempe
2 Bedroom
$1,590 per month, up 18.7% in the past year
Phoenix
2 Bedroom
$1,440 per month, up 11.6% in the past year
If you think the rental market will start to soften soon and prices will either level out or decrease, that may not be the case experts predict for some time until more rental units come on the market. Phoenix is creating lots of new jobs and we have people moving in from all over which is creating steady demand for rental units.
The Federal Reserve Bank of New York seems to think rental rates will increase nationally up to 9% through the end of the year. In it’s July 2021 “Survey of Consumer Expectations” publication the New York Fed indicated that rental rates could increase up to 9.8% between the report publication and the end of the year.
As a loan officer working every day to get people out of apartments and in to homes, I would strongly encourage those with the means to save to work extra hard to build up a Savings account so you can place yourself in a position to buy a home some time soon. Make a 12 – 24 month plan to save weekly or monthly to build up enough savings to put yourself in a position to buy a home.
I would love to see more people with the motivation and drive to budget and save so they put themselves on a path to homeownership. If you need help with this goal and would like to talk to a loan officer to find out how, please reach out to me via email or by phone so I can help you put together a financial plan to transition to homeownership.
Rental Statistics Source: Zumper, “Phoenix Metro Report”, August 17, 2021
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