People looking for family-size houses to rent in Phoenix-area neighborhoods have far fewer choices.
Since September, the number of available rental homes in metropolitan Phoenix has dropped by 40 percent, and probably even more than that when it comes to three- to four-bedroom homes in desirable neighborhoods.
The sharp drop is another ripple effect of the foreclosure crisis.
At first, foreclosures increased the number of houses in the rental market. And people who lost homes to foreclosure or short sales, or who just walked away from underwater mortgages, found they could rent similar-size houses, often in the same neighborhood, for less than their mortgage payment.
In many of the region’s newer neighborhoods, even tenants with bad credit could negotiate lower rents and how long they wanted to stay.
But in the past few months, as more of those former owners became renters, demand for those three- to four-bedroom rental homes climbed. And as lenders foreclose on more homes but are slow to resell them, the number of available houses has dropped. When houses do come on the rental market, rents are rising and landlords of family-size homes are receiving multiple offers and filling houses in days.
“The demand for single-family rentals is clearly outstripping the supply, causing an unprecedented fall in the inventory of available rentals,” said metro Phoenix housing analyst Mike Orr, who publishes the Cromford Report. “The trend shows no sign of stopping.”
Orr said many Phoenix-area apartment complexes still are having a tough time attracting tenants, but rental agencies managing homes have waiting lists.
Melissa Flores is a mother of three who lost her Avondale home to foreclosure in January. Ever since then, she has been looking for a house near her children’s elementary school. Flores has made offers on more than a dozen three-bedroom homes in Avondale and Surprise. But each time she lost out to other renters who were either willing to pay more or had better credit records.
“I knew people who lost homes and rented houses blocks from their old home,” she said. “I thought at least I could keep my kids close to their school and friends.”
Eight months ago, according to Orr, there were 5,460 rental houses listed on the Arizona Regional Multiple Listing Service. Now, there are about 3,100. Not all metro Phoenix rentals are listed on the MLS, but market watchers say rental activity on the Realtor-run site is representative of the overall market.
“The rental market is really tight for decent-sized homes now,” said HomeSmart real-estate agent Brett Barry.
Barry recently searched north Phoenix for a family who lost a home in the area to foreclosure. There were only four houses available with monthly rents that the family could afford. Six months ago, Barry said, the family would have been able to choose from at least 20 rentals in the area.
The rental market isn’t nearly as competitive for small houses or condominiums, market watchers say.
Dave Zundel, co-owner of Phoenix rental-management firm HomeLovers, said many investors immediately opt to buy lower-end homes, thinking those houses will draw the most renters.
In fact, he said, the upper- to middle-income type of home currently is considered the rock-solid investment for landlords.
“We don’t have enough of those homes available for rent now,” Zundel said.
Metro Phoenix foreclosures and short sales hit a record in March. But the number of rentals available for the displaced homeowners from those deals isn’t climbing at the same pace.
Flores heard that more three-bedroom homes may soon be up for rent in her old neighborhood as investors like the one who bought her home turn houses into rentals.
A year ago, investors were buying a few thousand homes each month and turning them into rentals. But now, lenders are holding on to more of their foreclosure homes as they work to catch up on a backlog of delinquent mortgages. So, the number of houses in the pipeline to possibly become rentals has dropped.
What had only recently become a pattern among displaced homeowners – renting in their old neighborhood – is now far less of an option. And even when houses come on the rental market, rents are now running close to or above comparable mortgage rates.
“If the rental inventory continues to fall in this way,” Orr said, “it is very likely that average rents for homes will start to rise in the not-too-distant future, something that hasn’t happened for a very long time.”