Phoenix’s Hot Housing Market and the Surging Demand for Multi-Family Housing
In Phoenix, Arizona, the only thing hotter than the desert weather is the current housing market. A steady stream of new residents lured by the mild winters, lower cost of living, outdoor recreation, and a rebounding job market have turned up the heat on the demand for housing in the Arizona capital and its surrounding cities. With so many residents in Phoenix and still waiting to buy, multifamily investors are uniquely poised to satisfy that unmet demand.
Phoenix is America’s fifth most populous city, with a population of about 1.73 million, which is expected to double by 2040. Its surrounding area, Maricopa County, boasts a population of almost 4.5 million and includes rapidly growing cities such as Scottsdale, Mesa, and Sun City. While greater Phoenix was a popular destination for newcomers during the pandemic, even before 2020, the area had been seeing new residents arrive in droves. In 2019, the Phoenix area attracted about 57,000 new residents. The trend continued in 2020, with about the same number of new arrivals, many of them transplants from California and other pricier markets.
That swell of new residents, combined with historically low-interest rates, has created unprecedented demand for real estate. According to Redfin, In May of 2021, Phoenix home prices were up 31.9% compared to last year, selling for a median price of $376K. In Maricopa County as a whole, home prices appreciated at about the same rate but the median home price is even higher, at $400,000. On average, homes in greater Phoenix sold after 24 days on the market compared to 40 days last year. The average home in greater Phoenix is selling for 1.8% above the asking price, while more sought-after properties can sell for 6% or more above asking. Many homes are getting multiple offers, often with waived contingencies.
Those appreciating home values present an excellent opportunity for multifamily real estate investors. Multifamily housing offers the highest risk-adjusted returns of all real estate investment products, and Phoenix has a huge base of renters who are paying increasingly more every year. According to Rent Café, the average rent for an apartment is $1,252, with a 10% increase in just the past year. That rapid appreciation leads to an even greater ROI for investors. With a quickly rising population and only about five weeks’ worth of supply on the market, this is a market that will offer exciting opportunities to multifamily investors for the foreseeable future.