Published June 23, 2024
Arizona cities among national leaders in luxury home rentals, report shows
Arizona cities among national leaders in luxury home rentals, report shows
Several cities in the Valley are among the national leaders in the amount of rental luxury homes, as the state embraces a fast-growing trend in the real estate market.
In a report released June 11 by Point2Homes that ranks luxury rental inventory among the 100 largest U.S. cities, Scottsdale ranked No. 8 with 34% of single-family houses on the market being in the luxury category. Phoenix cracked the top 20, coming in at No. 19, with a 13.5% share of rental homes in the luxury category.
Other cities in Arizona listed were: Glendale (No. 32 with a 6.6% share); Mesa (No. 37, 6.1%); Chandler (No. 42, 4.9%); Gilbert (No. 43, 4.8%); and Tucson (No. 54, 2.1%).
“This shows the strength of our Arizona market, because we have an influx of so many buyers and consumers still coming to Arizona,” said Chris Karas, a Phoenix-based broker and founder of The Karas Group. “Arizona is sought after; it’s one of the top destinations in the nation for people to move to, whether it's for a job or climate or retirement.”
Karas said that rentals give buyers a short-term option that allows them to assess the community and other inventory, which he also mentioned was down from past years.
This makes rentals especially advantageous to out-of-state buyers, and Arizona ranks among the top states in the nation as a moving destination, according to a recent report from PODS Enterprises.
“If they're coming from out of state, they want to make sure that they’re comfortable where they’re buying,” Karas said. “They’re renting just so they can explore more and get more familiar with what the communities are like.”
Nationally, the stock for build-to-rent homes, or homes built for the purpose of being rented rather than purchased, increased from 7,676 in 2020 to 27,495 in 2023, according to Yardi Systems Inc. Point2, a subsidiary of Yardi Systems, also reported that nearly 45,500 single-family homes for rent are under construction across the country.
The study noted that renters making more than $150,000 a year contributed to the biggest percentage gain in luxury rental growth between 2017 and 2022 compared to lower wage earners, up 105%.
It's no surprise that four of the top five U.S. cities with the largest share of luxury homes for rent out of their total rental stock were in California: Irvine, at No. 1 (73.5%0; Los Angeles at No. 2 (58.9%); San Diego, at No. 4 (40.7%) and Anaheim (40.2%). One East Coast city – Boston – cracked the top five, ranking at No. 3 (42.7%).
Continued economic uncertainty fuels rental market
Down the road, continued uncertainty around interest rates and state of the economy following this year’s election could have an impact on rental growth, according to Robert Joffe, a Scottsdale real estate broker with decades of experience.
“I’m seeing a concern with the elections, concerned that interest rates haven’t gone down, and the people that are feeling that the economy is not going to be in a good place come first of the year are certainly looking at leases as opposed to purchasing right now,” Joffe said.
Point2 also included an ultra-luxury home category, and cities in the Valley still had large shares for those types of single-family houses compared to other U.S. locations. Despite movement at the top favoring larger cities like Los Angeles, Miami, and New York, Scottsdale still ranked No. 8 with a 7.3% share of ultra-luxury houses for rent, while Phoenix’s 3.7% share was No. 10 in the country.
Glendale, with an ultra-luxury rental share of just over 3%, ranked No. 13.
Earlier in June, Dallas-based Streetlights Residential listed The Bergen, an ultra luxury boutique community at 4240 E. Camelback Road in Phoenix, for a monthly lease rate ranging from $8,000 to $16,000, a price range far surpassing other top luxury apartments in metro Phoenix.
