Rent and absorption trends are changing from the high-flying performance experienced in 2021. This analysis examines how these fundamental indicators have moved as of the end of September 2022.
Rent Trends as of September 30th
This graphic shows Phoenix and Tucson apartment rent trends over three intervals: 2021, September Trailing 12 months, and September Trailing 3 months (annualized). 2021 represents a trend that is three to four times greater than the long-term average. The flow from top left to lower right for each area demonstrates the transition to lower, more sustainable rent levels.
As the negative 3-month trend suggests, the overall rent level in Phoenix has dropped by $15.00 since July. In Tucson, overall rent is slowing but remains positive. On average, rent has increased by $8.00 since July.
New Supply vs Absorption
This graphic compares the new supply delivered versus the net absorption recorded for 2021, as well as for 2022 Year to Date through September. 2021 brought in the reopening of the economy after pandemic lockdowns. Historic job growth, combined with increased migration from the west coast, kept absorption out-pacing new supply. In 2022, the relationship between supply and absorption has done an about-face, with supply out-pacing absorption. The weakness in absorption is driven by persistent move-outs in property Classes B, C and D. Class A, where most new supply is found, remains steady, driven by those priced out of single-family housing.
New Supply Delivered
Since 2019, new supply delivered has steadily increased each year. This year’s estimate of 18,000 units to be delivered is driven by the 8,000 units already delivered and the 23,000 units presently under construction. This level of deliveries is problematic for sturdy rent levels in the currently-cooling market.
2023 is shaping up to be a year when flat might be considered a win. Recall that 2021 was a year that pushed through at least four years of growth.