By Jesse Fisher
The Arizona rental market has captured the attention of both investors and industry observers in the past week. New surveys and reports highlight shifting currents in rental rates, demand, and vacancy rates. For Arizona real estate investors, the implications are significant, especially in an environment redefined by fluctuating interest rates and evolving migration patterns.
According to a new report released this week by Apartment List, rents across Arizona’s major metropolitan areas have largely continued their upward trajectory in June 2024, compared to the same period last year. The Phoenix metro area, for example, saw average rent prices rise 1.6 percent year-over-year, now reaching about $1,470 for a typical two-bedroom unit. Cities like Mesa and Chandler posted modest gains as well, although the pace of rent growth appears to be decelerating from the breakneck surges observed in 2021 and 2022.
Tucson, Arizona’s second-largest city, displays a different pattern. While average rents edged upward by 0.8 percent year-over-year, that marks a considerably slower growth rate compared to previous years. Local analysts at the Tucson Association of Realtors point to increased supply as a primary reason. Developers have delivered a record number of new apartment units in the city since late 2023. As a result, landlords now face more competition, which has put a lid on rent hikes.
Data from the U.S. Census Bureau and a recent survey by RealPage indicate that Arizona’s statewide rental vacancy rate remains at approximately 6.1 percent as of June 2024. This is slightly higher than the 5.2 percent reported just six months ago. Phoenix, Scottsdale, and Tempe are registering the highest vacancy increases, which market watchers attribute either to new multifamily construction or the return of some small landlords to the long-term rental market after experimenting with short-term rentals.
Despite the moderation in rent increases and a rise in vacancies, demand for Arizona rentals continues to outpace much of the nation. This is especially true for the affordable and mid-tier housing segments. As per a June 2024 analysis from Zillow, Arizona continues to attract thousands of out-of-state residents each month, predominantly from California and the Pacific Northwest. Warm weather, employment opportunities in tech and healthcare, and the relatively lower cost of living keep fueling new household formations, all of which translates into robust rental demand.
On a regional level, Maricopa County remains one of the top destinations for U.S. movers in 2024. U-Haul’s latest migration data, which was covered by the Arizona Republic last week, placed Phoenix as the sixth most popular inbound destination nationwide. Coupled with continued job growth in logistics, manufacturing, and semiconductor sectors, this steady population inflow bodes well for landlords and multifamily investors.
An important twist in recent survey data is emerging in so-called “luxury” rental segments. New Class A apartment deliveries in Scottsdale, Chandler, and downtown Phoenix have piled onto the already competitive high-end market. Here, vacancy rates are reported as high as 8 percent, compared to 4 to 5 percent just two years ago. Many property managers, interviewed by local TV station ABC15 on June 21, report needing to offer free rent concessions or flexible lease terms in order to fill units. The resulting pressure is beginning to flatten rent growth in these upscale complexes. For investors, this means returns on new luxury assets may not match projections set during the frenzied years immediately following the pandemic.
Conversely, investor-owned single family rental homes continue to perform solidly. The latest MLS data, cited in a recent KJZZ radio segment, shows the median rent for a detached three-bedroom property in the Phoenix area stands at $2,200, a modest increase from last quarter. Demand remains strong especially in outer suburbs such as Buckeye, Surprise, and Queen Creek. In these areas, supply is still tight, and family renters value the extra space and access to new schools. For investors focused on single family buy-and-hold strategies, this segment continues to offer relative stability compared to the more volatile apartment market.
Another trend now gaining momentum is a modest decline in rental listing durations. Zillow’s June update noted that listings in Phoenix and Tucson spend an average of 17 days on market before being leased, a sharp drop from the 24 days reported in early spring. Industry insiders credit seasonal factors, as families typically relocate during the summer months, but also suggest that some renters who were previously priced out are readjusting their search criteria and returning to the market. This behavior underscores continued rental demand and suggests little imminent risk of a sustained glut—at least for now.
Arizona remains a preferred market for institutional and small-scale investors alike, but the current news cycle suggests more nuanced opportunities are emerging. Real estate economist Mark Stapp from Arizona State University, in an interview published June 20 in the Phoenix Business Journal, advised investors to revisit underwriting assumptions. He cautioned that the era of double-digit rent hikes is over, while interest rates for acquisition and development loans remain relatively high. Stapp also underscored the ongoing importance of location selection. He notes that “properties near major transit corridors and employment hubs are still outperforming the broader market in both rent growth and occupancy.”
Another wrinkle affecting investors is the evolving political and regulatory landscape. The Arizona state legislature is now debating several bills intended to address rising housing costs and tenant protections. While none have cleared both chambers as of this week, several proposed measures, such as caps on late fees and streamlined eviction processes, could influence future landlord operations and cost structures. As the summer legislative session progresses, investors would be wise to monitor these developments closely.
Looking ahead, the consensus from survey data and expert commentary is that Arizona’s rental market remains fundamentally strong, but the post-pandemic boom has transitioned into a slower growth phase. Investors who purchased properties at the top of the market, expecting rapid rent escalations, may need to adjust strategies or refresh their portfolios. Importantly, smaller metro areas and more affordable segments seem poised to outperform luxury-focused developments, at least in the near term.
Market resilience will likely depend on continued population growth and macroeconomic stability. Arizona’s diverse economy provides multiple anchors, from tech to healthcare to logistics. These factors should help cushion against national downturns, although some cyclical adjustment is already evident.
In summary, the latest survey news underscores the need for targeted, research-driven real estate investing in Arizona. The days of easy gains and rapidly accelerating rents are receding, replaced by a more balanced environment that favors disciplined underwriting and local market expertise. For both new and seasoned investors, staying attuned to rental rates, vacancy patterns, and demand signals will be crucial for thriving in Arizona’s evolving market.