Are Rents Softening

[Ken M.]

Ken McElroy, with 10,000 apartments, says rents Are Softening in Phoenix. Anyone else seeing this?

[Evan Polaski]

@Ken M. I guess I will answer your question with another:

What impact does it have?  

To answer your question: yes, large studies released by the bigger brokerages have shown Phoenix and other sunbelt markets showing overall rent declines. But, these broad market studies are so large, they are almost meaningless, in the real world.

Between glut of new supply in many "hot" markets coming online, a continually softening economic outlook, inflation over last couple years making day to day items feel cost prohibitive, many average renters are strapped and seeking lower cost housing.  As there is a general flight to affordability, the new developments don't fill as quickly, and rely on concessions and/or lower asking rents to fill up.  When a Class A apartment can be had for the same price as a Class B/C renovated unit, the B/C operator drops prices, and so on.

But, in terms of making an investment decision, I think it is short sighted to rely purely on full market average data.  There are still properties that can increase their rents, and may make for a good investment.  Whether it be a submarket that is still growing or a property that needs some love and investment.