Economic forecast events held around the state are offering a glimpse into the short- and long-term outlook for Arizona’s economy. One of the bright spots in our sustained, albeit measured, recovery, has been the apartment sector. Thousands of new multifamily units continue to open around the Valley and in major markets around the state. But the common question is: Are we building too many?
During a recent Arizona Multihousing Association economic forecast breakfast, several speakers highlighted the lack of new construction during the recession years, and the overall growth of our local economy over the past few years. This combination of factors is what drives the current building cycle. Arizona expects to add 100,000 new residents per year through 2019.
Combined with millennials and boomers who are moving into apartments, this growth is forecast to translate to more than 14,000 new renters each year. When compared to current projections of approximately 5,500 new apartment units annually in Phoenix for the next few years, it becomes clear why the construction of new apartment communities continues throughout the Valley.
Like generations before them, Millennials are entering the housing market now, many of them later than their predecessors.
Many of these first-time renters come to the market with student-loan debt that could prevent them from saving to buy a home. According to Pew Research, a record share of 25-34 year olds live in their parents’ homes. Some economists predict that they could stay in the rental market longer as well.
Even if there are more new apartments than there is demand (which will help curb the growth of rental rates short term), the population growth of our metro area will quickly result in absorbing those new units, causing even more to be built. Rental rates will ebb and flow with demand, and Phoenix will remain one of the most affordable places to live.