Qtr 3 2013 – The Metro Phoenix Apartment Market Part 2

Jim Kasten
By | 2017-10-04T14:31:06+00:00 November 22nd, 2013|

SLOW DOWN – Possibly the most notable item for the market at this time is what has happened in the past couple months – we have slowed down.  The housing market actually led the “slow down” with available inventory increasing 20% and 30% fewer transactions between July and October.  For the apartment market, while transaction activity remained strong through September, the brakes came on in October with many fewer transactions.  At least a third of the advertised inventory has now been on the market for more than six months.  WHY?  There are several obvious reasons cited by our buyers: 1. investors now perceive our area as having reached a level with near-term future growth being greatly reduced; 2. the low-priced, value-add opportunities are virtually gone; and 3. an increased concern with the effect of the new apartment construction.

We remain very optimistic – and we strongly believe that our market will be a great place to be invested, but we have growing fundamental concerns – many that are related to the recovery of the entire US. Our economic recovery is very fragile – evidenced recently by the slight increase in mortgage rates almost overnight shutting down the real estate industry.  Another huge concern is the government and its socialistic direction plus the recent realization by folks that make $100K+ that their insurance rates may double due to Obama Care.    To sum up – investors are fearful and this may develop into a hiccup in our recovery.  A silver lining may be that with fewer investors in the market – assets may be a bit more affordable.  In addition, since we are not building apartments to compete with the lower rental rate “B” and “C” assets, when we do have the population influx, the added demand on these properties should result in higher rents and value.

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