January 30, 2023

Phoenix Q4 Market Insights: Renter demand cools despite continued job gains

Highlights:

After recording some of the strongest operating conditions in the country in recent years, multifamily market fundamentals cooled across the Greater Phoenix region at the end of 2022. Vacancy rose as completions outpaced renter demand, and rents fell in response to the supply-demand imbalance.
Vacancy rose 60 basis points during the fourth quarter, reaching 6.4 percent. The rate spiked 210 basis points in 2022, the first year that local vacancy pushed up since 2016.
Following a minimal dip in the third quarter, rents contracted at a faster clip to close the year. Rents dropped 2.2 percent in the fourth quarter, reaching $1,616 per month. Despite the declines in the second half, rents inched up 2 percent in 2022.
Fewer multifamily properties traded in the fourth quarter, and prices dipped after steep increases in recent years. The average cap rate in the fourth quarter exceeded 5 percent. The median price for the full year was $286,900 per unit, but fell to $242,400 per unit in transactions that closed in the final three months of 2022.