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Radix Chief Economist Jay Denton Provides Sampler of Upcoming Connect Phoenix Multifamily, SFR & BTR Event
We are continuing with our series of previews from esteemed panelists we are showcasing for the upcoming Connect Phoenix Multifamily, SFR & BTR on April 10, and the Westin Kierland Resort & Spa in Scottsdale. We caught up with Jay Denton, Chief Economist at Radix.
You recently wrote that you’re less concerned now about multifamily fundamentals going forward than you have been for the past couple of years. What has changed?
That was before some of the recent uncertainty was introduced into the economy. The job market drives demand for housing, and that is a bit up in the air now. At the time of this publication, the announcement of tariffs has jolted the market, and the risk of a near-term recession has risen based on opinions from leading economists.
If the job market can keep producing despite some rocky headlines, multifamily operational performance could be in for a rebound in many markets this year. Average annual effective rent growth in improved in three-quarters of markets during the first quarter of 2025 relative to a year ago. While growth is still negative in some metro areas, such as Phoenix, the trend has improved in most places as more balance returned in the second half of 2024.
The level of new supply has started to moderate in many places, which has been one of the driving factors. Often supply is simply returning to the level it used to be at prior to the construction boom that started a few years ago. If the economy struggles in the near-term, it could keep supply lower for longer.
The challenges in the for-sale market also give some degree of positive impact to multifamily rentals as well. Based on data from the National Association of Realtors, the median age for a first-time home buyer jumped to 38 years old in 2024. Prior to pandemic, it had been between 30 and 33 years of age for decades. Unaffordable prices, high mortgages rates, and a lack of inventory are among reasons keeping people in rental housing for longer.
Still, job growth and the economy will be the main wildcard to follow this year.
- What are the factors that most favor occupancy and rent growth, especially in Phoenix and the Southwest?
The story remains all about population growth and the job creation that drives it. Supply will have its ups and downs, but few places have the type of long-term housing demand as Phoenix and other Southwest markets.
That said, growth in many of the high-demand markets slowed significantly in 2024, which leads into the next question.
- Conversely, what are the headwinds that multifamily operators face?
Based on data from the Bureau of Labor Statistics, job growth slowed significantly in the Phoenix area during the second half of 2024, and it is in negative territory at the start of 2025. The latest data available, which is for February 2025, showed there were 7,500 fewer jobs in the Phoenix metro area compared to the prior year.
Job losses in Phoenix are not contained to one industry. Construction, manufacturing, information, retail trade, and professional and business all shed job from the prior year.
Other markets also known for stellar job growth, such as Atlanta, Dallas, and Austin, are adding jobs at half the pace or less compared to typical growth. Denver’s latest annual job growth was negative as well.
Supply is the typical answer, and that still holds true today. Even as supply levels start to normalize, there is still an overhang of previously delivered units. Right now, Phoenix and some other markets in the Southwest have occupancy rates lower than the national average, which has led to higher concessions.
- What questions do Radix clients most often have for you?
I think it depends on where the market is in the recovery cycle. In the hardest hit markets, they want to know any early signs of progress back to higher occupancy rates and positive rent growth. If the numbers are still negative, are they headed in the right direction? Are there certain areas of town or types of assets that are gaining traction. At this time last year, a lot of markets were in this category. Thankfully, fewer are in it right now.
For the markets where rent growth is on either side of 0%, it’s about understanding at a submarket level. When can you budget 3% rent growth again for that type of property or part of town? You can see stabilization is on the way, but the market is not fully on track yet.
Many markets in the northeast and Midwest areas of the country recovered earlier than the high supply markets in the south. In those types of markets, things are much more like the long-term norms. There, the focus is on the individual asset, whether it is achieving its budgeted performance, and how it benchmarks to local trends.
April 10 – Rental Housing Leaders Take the Stage: The top developers, investors, owners, lenders, managers, brokers,and more will be onstage and onsite at Connect Phoenix Multifamily, SFR & BTR – will you? Register to join the industry’s power players and experts on Thursday, April 10th to find out what the top minds in Phoenix & Scottsdale rental-housing predict for the balance of 2025. www.ConnectPHXMF2025.com | April 10, 2025 | The Westin Kierland Resort & Spa, Scottsdale.
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