Among the interesting turnabouts that abound in the Scottsdale Real Estate market as of late, the rental market has demonstrated surprising new strength.  Where there was formerly a preponderance of housing options for prospective tenants over the last couple of years, what with all the struggling homeowners out there eager to find someone else to pay their mortgage while they shacked up in less costly digs, a noticeable contraction in available properties for lease is occurring.  With more and more people walking away from their upside down homes, whether by necessity or by choice, the credit and financial hits they take in the process renders them radioactive to the purchasing option for years to come (though, some have perfected the “buy and bail” strategy of purchasing a new home before abandoning the current residence).  As such, the rental market has become inundated with demand.

With this surge in demand and a subsequent decrease in supply, rental values have not only held firm, but have noticeably increased in the markets I work.  From a purely anecdotal standpoint, I have been shocked by the level of competition for not only the properties I have had listed for lease recently, but for the tenants I have worked with to secure rental properties as well.  Mind you, I am not simply referring to the low end pricing (sub $1000/month) where heightened competition is always to be expected, but in more expensive price ranges to boot.  In particular, I am seeing a LOT of interest in properties that are renting in the $1400-1800 per month range.

Checking the latest statistics to see if what I have noticed is playing out on a larger scale, I see active Scottsdale rental listings are down to roughly 1800 units (as of ARMLS’s May figures).  This marks a steady decline from an inventory that reached a high point of 2568 in November of 2008 and did not dip under the 2000 unit threshold until January 2010.  The 5.19 months of rental housing supply (as determined by the current rate of absorption) is at its lowest point in years.  Interestingly, the overall average rental rate has not shown a noticeable jump, despite my recent personal observations.  Given the decrease in total inventory and increase in absorption (units leasing per month), however, I fully anticipate next month’s numbers to reflect a higher baseline average.

This shift in the rental market tells me two things:

1)  Before deciding to walk away from a house that appears irretrievably underwater in terms of negative equity, homeowners (and potential future renters) really need to study their options carefully.  If I had a nickel for every misguided homeowner who erroneously believed there was an unmitigated plethora of housing options, at bargain basement prices, waiting for them once they pulled the plug on the Bank of Extortion … er, I mean “America” … I could comfortably retire to my literary tinkerings.  The assumption that lower selling prices go arm in arm with lower rental rates is patently false.  Further, with all of the newfound competition for rental housing, your chewed up credit report will be scrutinized a bit more by potential landlords than most would expect.  Sure, a human landlord may be more understanding of the recent economic woes than some faceless underwriter, but as in any free market, it always comes back to options.  If there are renters out there with fewer credit issues and deeper pockets, you are going to get aced out.  Please consider where your escape pod is heading before abandoning ship and scuttling that home turned financial Death Star.  If there is no soft landing, how have you benefitted?

2.  Our market may have reached (or is close to reaching) that sweet spot in which it makes sense for the homeowner with designs on a move-up purchase to revisit the rental potential of his/her existing home.  While the notion of renting an existing house out (to offset the mortgage) to free oneself up to take advantage of the market conditions and purchase a considerably larger home for a fraction of its prior value is nothing new, the increasing strength in the rental market makes the strategy more feasible at present.  The biggest hurdle to this play, other than deciding whether one is really cut out to become a landlord, remains  the qualification process.  Unless you are one of the fortunate few who maintain at least 25% equity in your home, you will essentially have to qualify to carry both loans (the existing house as well as the new one you would purchase).  Even if you secure a tenant whose rent will cover the payment, you will be qualified for the new loan as if you were qualifying for both properties.  If you have the means to do so, the time could be right to finally leverage the conditions that seemingly everybody and their brother’s mail carrier have already managed to exploit.

Whatever your goals for the Scottsdale Real Estate market, drop us an email or give us a call with your specific needs / questions.  You might not be as trapped as you think.

(480) 220-2337 | paul@scottsdalepropertyshop.com

It is not atypical for Real Estate agents to spurn rentals.  Much to the chagrin of frustrated prospective renters, that is one voicemail that seldom gets returned.  For an agent backlogged with more lucrative opportunities, he/she will often leave the red-headed stepchild of the industry to the property managers.  You don’t get rich matching tenants and landlords, especially if it is not the main thrust of your business.  Thus the rental stone is not merely left unturned by the high fliers, it is disregarded as a stone altogether.  More like a pebble, the likes of which will find its way into your shoe and cause great discomfort to those who would tread too close.

Part of the problem with the rental market is that the compensation is a prohibiting factor.  Realtors are hired guns.  As independent contractors, we are always performing risk/reward analysis.  For many, the potential reward of a rental transaction is not nearly lucrative enough to justify the risk of the effort not successfully culminating in a paycheck.  To operate on straight commission, productivity must be maxed and the upside ridiculously high, otherwise, we would all opt for the safety of a salaried position.  With compensation for rental properties drifting downwards in recent years, the opportunity cost has simply become too great for many in our ranks.  Why shuttle around some schlub for two days in hopes of collecting a $150 paycheck when they might put a $500,000 buyer in the car instead?  Of course, you also have a segment of agents who might simply find such menial work beneath their inflated sense of self, but you get those types in every field.

I can’t rightly attest to the motives of those who brush off rental prospects, but I can tell you why I do not.  Any agent worth his or her salt looks not only at the present business horizon, but the future skyline as well.  In my estimation, today’s tenant is tomorrow’s buyer.  Whenever the financial and personal wherewithal comes to make that transition, I want to be the agent they remember that helped them when the others gave them the brush off.  If my competitors want to slam the door on these apparently inconsequential house hunters, I will gladly use the opportunity to get my own foot in that very same door.

Anyone can sell someone a house.  It takes diligence, empathy and yes, a little luck (hard to compete with Aunt Margaret when she gets bored and gets a Real Estate license) to sell a person every home he or she will ever own.  I aspire to the latter.  Performing a service that can be tantamount to pro bono work in some cases is one means of achieving that aim.  It never ceases to amaze me how many advertising dollars some agents will spend to attract new clients while completely neglecting the opportunities that don’t cost a nickel (a little gas notwithstanding).  For the chance to gain the trust of consumers while they are at either the infancy or nadir of their journey towards home ownership, I happily pick up that slack.  Working rentals over the years whenever the opportunity has arisen, I have procured some of my very favorite and most loyal clients.  They tend to stick with you on the way up when you were there for them at the bottom.

To all of my esteemed colleagues who neglect the rental market, I thank you.

To the frustrated renters out there who can’t get an agent to return a phone call, email or smoke signal, give me a buzz.  I will gladly help you find temporary housing in the Scottsdale, NE Phoenix and Paradise Valley area.

And when you’re ready to buy … I wouldn’t be adverse to taking that call, too

Update: This Home Has Been Leased

This is not your typical rental home. Gorgeous Victorian style home in prime Central Scottsdale neighborhood that you never knew existed. Nestled on a premium, oversized, interior lot, this 2300+ square foot home boasts 3 bedrooms, 2.5 baths, pebble-tec diving pool (fenced) and 2 car garage. Hardwood and slate flooring in main downstairs traffic areas in addition to upgraded carpeting. Slate covered fireplaces in family and living rooms. Master bathroom completely overhauled in 2008 with travertine flooring & shower surrounds, new vanity w/granite top, new fixtures, etc. Upstairs hall bath remodeled as well with travertine flooring & shower surrounds, new counter top and fixtures, etc. Wide open floor plan with all 3 bedrooms up and entertaining areas down. Kitchen opens to family room and overlooks the backyard. Front yard includes porch, beautiful mature ash trees, lawn and even a white, picket fence. The prettiest home on one of the prettiest tree-lined streets in the Valley. Close (but not too close) to Loop 101 freeway, Scottsdale Community College, parks, schools, golf, shopping, ASU, downtown Scottsdale … everything. Better hurry, these homes are quite rare and lease quickly.

Pool service included at $1895/month.  Landscaping also included at $1995/month.  $1900 security deposit (refundable) and $300 cleaning deposit ($200 non-refundable) due at move-in along with first month’s rent. $500 earnest money required to tie property up. $15 credit check fee per applicant.  Good credit & verifiable income a must. Most importantly, looking for tenants who will love the home as much as we do!

Offered for lease by Owner / Agent, Paul Slaybaugh w/ Realty Executives. (480) 948-9450

Equal Housing Opportunity.