According to the BLS, of all the U.S. Metropolitan Statistical Areas (MSAs) with over one million in population as of 2010 Census (51 MSAs), Phoenix MSA was the 4th best performing metro in September, having gained back 51 percent of March/April’s job losses.
Despite previously reported minimal contractions in quarter-over-quarter readings due to Covid, as of the end of Q3, the Phoenix MSA continues to be a nation leader in y/y rent growth rising 4.1 percent to $1,247, four times higher growth rate than the national average which contracted (0.1) percent, but still
$164 below the National average rent of $1,411.
Occupancy rates continue to defy expectations and increased 30 bps over-the-year to 95.4 percent despite delivering a high of 3,567 new units, well above the three-year delivery average of 2,000 units. This marks the 35th consecutive quarter occupancy has been above the 20-year average of 91.6 percent.
Given the current construction rate, 2020 should prove to be the highest delivery amount since 2009’s 9,315-units. There are 22,152 units currently under construction throughout Greater Phoenix and marked the 26th consecutive quarter where the number of units under construction was above 10,000.
Investment sales volume increased significantly over-the-quarter rising 238 percent to $1.2B with average PPU (Price Per Unit) increasing 4 percent to $182,268.
For the last five years the Phoenix MSA was growing, on average, +/-215 residents per day. Over this same time, Maricopa County was, and continues to be, the fastest growing county in the nation with the Phoenix MSA overtaking Boston as the 10th largest MSA.
While population counts, and estimates, for 2020 are yet-to-be released, current evidence (from moving data to net new utility hookups to retail sales) suggest that over the last six months Phoenix’s growth rate has increased nearly 25% to +/-260 new residents per day.
If this holds true, and assuming a 60/40 ownership-to-rentership household split, Phoenix will need an additional +/-3,000 units just to accommodate the extra population growth. Considering our current housing deficit of +/-32,000 units, market equilibrium is not foreseen in the near-to-medium terms.
Despite significant near-term volatility, from the election results to potential for new lockdowns to escalating lumber costs, up 91 percent y/y, to stalled stimulus talks, there are a few bright spots: one, despite significant increases in the number of Covid-positive cases, per capita mortality rates have continued to decline. In fact, for Arizona, the per capita mortality rate as of 10/27 was 0.08% in Maricopa County 0.07%.
Second, the employment bounce-back has been significantly faster than many anticipated and finally, while there is nothing set in stone, there are several proposals currently being discussed in Washington to extend unemployment benefits but that will not occur until after the election.