Opinion mixed on out-of-state impact on Valley homes for sale
GLENDALE — When searching for an overnight rental, many people have found comfort in a residential rental.
But many in the Valley are question the explosion of the short-term rental industry in the region and it’s impact on the local housing market. And opinions are divided on what it means.
Out-of-state banks, holding companies and individuals have bought Valley homes and marketed via online sites such as Airbnb, Vrbo and others.
Realtors, in their efforts to find appropriate homes for potential customers, say they are struggling with this issue, dealing with a reduced inventory and, in some cases, whole blocks of rental homes used mostly for parties and vacationers.
A study of homes shows the average overnight rental price for the 1,334 homes available in Mesa on a recent day was $198. In Sun City, it was $171 for 74 units.
Jennifer Allen, the chief creative officer for 72SOLD, said the shortage has had an impact on the ability of qualified buyers to find homes.
“It definitely has a negative effect on sale prices with respect to potential buyers who plan to occupy the properties instead of renting them,” Allen said. “It makes the properties less desirable for this group of buyers.”
Allen said the presence of overnight rental homes has a slightly negative effect with respect to investment buyers as well.
“Homes in quiet neighborhoods without a lot of rentals tend to rent for a higher monthly rate,” she said. “It further affects the quality of life in a community, because particularly with short-term rentals, you have so many people coming in and out who tend to stay up later and create more noise and activity in and around the area."
Allen said the buy ups also lead to an excess inventory — temporarily. When investment firms buy large blocks of homes, it sometimes allows them to manipulate prices.
“They have so much buying power” under those circumstances, she said. “Also, a sudden decision to sell a lot of those homes could end up flooding the market with inventory.”
There are few studies to show the impact of short-term rentals on overall housing markets. Those that are done look at specific market’s such as Los Angeles, so gaging the impact can come down to anecdotal information.
A review of random Maricopa County for rent shows some are owned by out-of-state entities. A Scottsdale property on Mitchell Drive is owned by Desert Norseman Mitchell Inc., headquartered in the San Diego area.
Some homes are listed on websites as overnight rentals. A Gilbert home that rents a two-bed suite for $280 per night is owned by IH6 Property Phoenix LP, which is listed by the Arizona Corporation Commission as a “foreign limited partnership,” with no mailing address.
Even in areas where there’s less out-of-state ownership, there are still blocks within residential neighborhoods with high percentages of rentals.
One block in northwest Phoenix, near Glendale, is northeast of the intersection of 41st Avenue and Pinnacle Peak Road. A string of contiguous homes on that block are owned by a couple with a California mailing address, a living trust and a Scottsdale-based leasing firm. CPI-Amherst, a foreign limited liability company with an address in Austin, Texas, owns another home on that block.
A high number of single-family rental homes in an area doesn’t have the same impact as an apartment complex or condominiums, Allen said.
“It tends to have a negative effect on the quality of life and saleability of homes in quiet neighborhoods as well as a negative effect on hotels and resorts,” she said. “They’re facing competition from investment owners who typically don’t have to comply with all of the safety regulations and other governmental oversight required of commercial businesses.”
Allen said this trend has become part of what’s discussed with potential buyers up-front.
“We are careful to disclose to buyers if we know about short-term rental properties in the area because of their effect on the quality of life,” she said.
Several Arizona cities, notably Scottsdale, Paradise Valley and Sedona have tried targeting those quality-of-life issues through lobbying the legislature to change state laws giving cities more power to regulate short-term rentals. Scottsdale has seen among the biggest impact of short-term rental buyers purchasing numerous houses.
But not everyone in the Valley real estate business is experiencing the same issue. A broker with a prominent Valley firm, who asked to be anonymous, said there aren’t enough overnight rental homes in the areas Award serves for it to be an issue.
“We haven’t seen whole blocks being purchased by corporate buyouts in the areas we serve,” the broker said. “Inventory was at record lows for over 18 months until the end of May.”
That firm serves more than a dozen Valley communities, but primarily focuses on retirement communities, such as Sun City, Sun City West and Wickenburg.
Evans said through the end of May, institutional buyers are part of the reason home prices kept climbing.
“Since the end of May, inventory is up, demand is down and interest rates are high,” the broker said. “The investors and other institutions who were buying things up weren’t making the prices spike, but they were keeping the prices high. Then, interest rates went up, and now we have inventory, but no buyers.”