Understanding the Phoenix Rental Market: Predictions for the Next Decade (2024)

If you are investing in Phoenix real estate right now or planning to in the near future, you need to have a solid understanding of what is going on in the market.

You also need to know what is coming towards you.

We do not have a crystal ball, and we are not fortune tellers. But we are Phoenix property managers, and we have been in this market long enough to see things peak and fall and grow and shrink. The next decade or so will be pretty huge for our real estate and rental markets, and we want to make sure the investors we work with are prepared.

Let us make some predictions for what the Phoenix rental market will look like over the next 10 years.

Phoenix Rental Market Trends in 2024

Let us start with where we are.

Phoenix has been a market worth watching for several years now, and the success investors have found here is due to the consistent population growth and the city’s growing economy. Demand for rental homes has grown considerably, and recent statistics show that rental prices are on an upward trajectory.

We can look at inflation and high mortgage rates as reasonable explanations for why rental values have risen so dramatically, but really it is due to the simple law of supply and demand. With more people moving to the Valley for its employment opportunities and desirable lifestyle, the competition for well-maintained, high-quality housing in desirable neighborhoods has pushed prices up.

Phoenix is the capital and largest city in Arizona, and it offers an attractive year-round climate, steady population and job expansion, and relatively affordable home prices that continue to draw new residents and attract real estate investorswho are looking to grow their portfolios. Our market has been a hotspot for local investors and a lot of investors from outside of the area.

The area is known not only for its fantastic weather but also for its affordable living compared to other large urban centers. Phoenix offers an appealing balance for both investors and residents who are looking for a region that offers everything a large city can provide without the exorbitant costs. You will not have to spend millions on a home as an investor. While the market has witnessed some serious fluctuations in prices and inventory, this is not uncommon throughout the general economy and national real estate market. The housing dynamics in Phoenix are strong and remain competitive in 2024. This has contributed to an even stronger rental market.

What’s Available Right Now In Phoenix Investment Properties?

Sharing Statistics

• According to the data we have gathered, the median sale price of a home in Phoenix is comparatively higher than the national average, landing at around $430,000 with a market that is somewhat competitive. Investors who are buying and selling will find themselves accepting and competing with multiple offers.

• For rentals, the market has seen a median rent for various property types settling at around $1,750 per month.

What are the Key Factors Driving the Current Phoenix Rental Market?

1. Relocations are growing. Maybe it is the popularity of remote work or maybe there really is an exodus from more expensive states like California and Oregon. Phoenix continues to attract new residents who appreciate the warm temperatures, low cost of living, and growing economic opportunities. This influx of people puts pressure on the existing housing inventory, and rentals are in high demand.

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2. Limited new construction. A lot of the planned development has moved slowly. While new construction projects are underway, they have not kept pace with the rapid population growth, leading to a shortage of available rental units. Once some of this new construction finally comes online, there will be a slight ease in the demand and expanded inventory, making things a bit more competitive for owners and investors.

3. Investor activity keeps growing. The Phoenix market continues to enjoy an increase in investor activity, with individuals and companies purchasing properties to add to their rental portfolios. This has further decreased the availability of rental homes, and driven prices up.

The current Phoenix rental market offers you challenges and opportunities. The rewards, right now, are far outpacing the risks. This is especially true if you are working with a Phoenix property management partner who can help you navigate the market and keep your decisions aligned with your investment goals.

Things rarely stay the same for very long. Let us take a look at where we believe things may be going.

Future Predictions: Phoenix in a Few Years

Plenty of real estate, economic, and investment experts agree that our Phoenix rental market is likely to continue its growth trajectory and remain competitive in the near future. As we move through 2024 and head towards 2025, we expect that rent prices will continue to rise, even if there are some brief downward fluctuations. The pace of growth may slow down, but not by much. New rental construction will ease the short supply and meet the demand of a growing population of renters in Phoenix.

Why We Think Phoenix Will Continue to be a Good Place to Invest in Real Estate

We do not have to tell you that investing in real estateis a significant decision that requires careful consideration of various factors, including due diligence around the market you are planning to explore. Whether you are buying your first investment property or your tenth, you want to know that conditions are not only good right now but will continue to be strong and supportive of your investment goals in the future.

The Phoenix Metropolitan Statistical Area (MSA) has been a popular choice for real estate investment over the last few years, and the data we have gathered shows us that the next few years will only offer better opportunities to investors.

Here’s why.

There is a strong demand for rental properties in Phoenix now, and that demand is poised to continue growing. Phoenix continues to experience a significant influx of residents, and they are going to keep coming in the next year, two years, and five years. They are arriving for jobs, for affordable living, and for endless recreation and entertainment. Most new arrivals will rent before they buy.

Our prediction is that demand will continue to increase along with population numbers.

The Recession that Never Arrived

If you think back to late 2022, you might remember that there were experts forecasting a recession, particularly in the housing market.

It never really came.

That is good news, and further proof that Phoenix is poised to grow and attract real estate investors and residents over the next 10 years.

Most economists who were talking with alarm about the need to prepare for a recession cited rising interest rates, combined with high consumer spending. These alarm bells were real, and a recessionary period would not have been a surprise, but the market prevailed. The economy held on, and things are in generally good shape, especially if you are a rental property owner.

There is still some risk, of course, even in a market as robust as the one we are enjoying in Phoenix.

The national housing market is currently experiencing a mix of factors that are always driving alarm and recession fears. Interest rates have not gone down yet, although the Federal Reserve has indicated that they will at least a few times this year. Those rising interest rates and high mortgage rates can look problematic.

But, it is not definitive. While some economists predict a mild recession by mid-2024 or early 2025, others believe the economy will navigate through slower growth without a recession. We tend to lean towards optimism, especially in Phoenix, which seems poised to withstand even the worst possible downturn.

Future Predictions: Phoenix a Decade from Now

We have talked about Phoenix right now, and why it is a great market for investors.

We have talked about Phoenix in a few years, and why we believe it will continue to be a great market for real estate investors, especially when we are talking about rental properties.

What about 10 years from now. What can we expect from the Phoenix market in 2034?

The first thing that comes to mind, obviously, is technology.

The second thing? Sustainability.

These are not necessarily your average talking points when it comes to real estate, rental homes, and maximizing your investment portfolio. But we are looking long into the future, and things are already trending in that direction.

Sustainable Rental Housing in Phoenix

As there continues to be a global shift towards prioritizing a more sustainable future, the real estate industry is picking up the trend, and in climates such as Phoenix, it is especially necessary. We have a water situation, and if it is not dealt with responsibly, there will need to be some very creative solutions 10 years from now.

Real estate investors in Phoenix will find that contributing to a cleaner environment in 10 years is not exactly an option. It is a necessity.

You can begin positioning yourself and your rental property now for what we expect to see in 10 years, which will include:

These things may not seem like they have anything to do with real estate investing. But, each one of them does impact the development, management, and maintenance of your rental properties. Right now, only about 14 percent of energy needs in residential homes are met by renewable sources. That is likely to jump to a much higher percentage in the next 10 years. If you think prioritizing wildlife has nothing to do with you, where do you think new homes will be built? Probably on land that is right now home to javelina, deer, bobcats, sheep, and roadrunners.

Technology and Phoenix Rental Homes

Over the next 10 years, the smart home technology and the property management technology that we are all so impressed with will feel quaint and outdated. With Artificial Intelligence (AI) paving the way for industries to grow faster and more skilled, there is no telling what it will look like when tenants get in touch to schedule a showing. Right now, we are all on board with self-showing tech and even virtual tours. In a decade, things will almost certainly move faster, more efficiently, and with less room for error.

We are not worried about the human element. That will always be necessary. As a real estate investor, however, you should be prepared for even more data that is even more precise than it has ever been before.

Smart home technology is growing in popularity right now. As Phoenix property managers, we know that tenants are looking for smart thermostats, video doorbells, and digital keypads. In the next decade, smart homes are likely to become even more interconnected, intuitive, and energy efficient. We are already seeing signs of advancements in AI, the internet of things (IoT), and automation technologies. You will be renting out homes that can more easily anticipate tenants' needs, adapt to their preferences, and optimize resource usage. This will create a more personalized and customized rental experience.

We like to think about the future, but we never want to compromise our attention to the here and now. If you would like to talk through the best ways to make long-term, sustainable decisions about your Phoenix rental properties and your investment portfolio overall, please contact us at Service Star Realty. We would love to talk about this further.

Service Star Realty

2929 East Camelback Road #119, Phoenix, AZ 85016

(480) 426-9696

https://www.leaseaz.com/