Phoenix build-to-rent project looks to capitalize on growing mortgage costs as multifamily rents fall

Article originally posted on CoStar on December 2, 2024

A newly opened build-to-rent development on the western outskirts of Phoenix is looking to capitalize on the city’s rapid population growth and rising costs of homeownership.

Locally based builder Curve Development is set to open its most recent project, Cyrene at Skyline in Waddell, Arizona, roughly 30 miles west of downtown Phoenix in the city’s West Valley region. The development includes 102 single-family rental homes with three- and four-bedroom floor plans ranging from 1,433 square feet to nearly 2,091 square feet.

Each unit also includes a two-car garage and private yard. Its location places residents in a top-rated school district and is a short drive from Phoenix Sky Harbor International Airport. Nearby employers include Luke Air Force Base and Wells Fargo.

“This single-family home luxury rental living opportunity in the West Valley … is perfect for families looking for privacy without the barriers of homeownership,” Nathan Pile, found and president of Curve, said in a statement.

The project marks Curve’s 10th overall development, including its third in Arizona, and comes as the Phoenix population has grown and house prices have surged.

Since 2020, the Phoenix population grew 4%, according to the U.S. Census Bureau. Curve estimates the city will grow by an additional 920,000 new residents over the next decade — with more than half that growth focused in the West Valley — requiring 340,000 new housing units.

That growth, combined with a for-sale inventory that declined 14% from October 2022 to October 2024, according to the St. Louis Federal Reserve, drove up costs in the mortgage market. Since the beginning of the pandemic, house prices as measured by S&P CoreLogic Case-Shiller Home Price Indices have risen 64% in the Phoenix area.

Increases in the cost of housing have driven demand for an alternative to homeownership that mirrors many of the benefits of single-family living. A recent survey from developer Knightvest Capital indicated home prices have been a main motivator for nearly a third of renters who gave up on homeownership altogether, along with half of the survey’s respondents who said renting is now a long-term choice.

Alternatives are also attractive to developers in Phoenix, where a flood of new supply has pushed down rents at traditional multifamily properties. The final months of 2024 will cap a three-quarter run in Phoenix that has added more than 19,000 new apartment units.

By the end of the fourth quarter, the city will see an estimated 6,770 new unit openings, the most ever recorded by CoStar. The previous record was set in the second quarter of this year when 6,710 units opened. The third quarter — which now holds the third spot for most unit deliveries — saw more than 5,900 unit openings.

Under the pressure of this new supply, rent growth in Phoenix has struggled. In the third quarter, annual rent growth contracted by more than 2%. Rent declines in the fourth quarter could reach near 3%, according to CoStar data. Since the second quarter of 2022 when rent levels peaked, prices have fallen 6.66%.

Phoenix-based Curve maintains a national portfolio of dedicated single-family rentals. The firm is funded by JEN Partners, a New York-based private equity fund. The company said its current efforts includes an additional development in Arizona and five more projects underway across the country.