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.