Jay Denton on Phoenix Job Creation, Salary Growth, Multifamily Performance, Absorption Rates, and More

Jay Denton is the Chief Economist at Radix, where he analyzes market conditions, forecasts housing and economic trends, and provides industry insight to dealmakers and experts. Jay will speak on the Phoenix Economic Update panel at the Connect Phoenix Multifamily & SFR-BTR conference on April 18^th in Scottsdale, where he will provide meaning to data trends on both a macro and micro level. 

Jay Denton is the Chief Economist at Radix where he analyzes market conditions, forecasts housing and economic trends, and provides industry insight to dealmakers and experts. Jay is speaking on the Phoenix Economic Update panel at the Connect Phoenix Multifamily & SFR-BTR conferencecoming up on April 18^th in Scottsdale, where he will provide meaning to data trends on both a macro and micro level. 

Q&A with Jay Denton, Chief Economist, Radix

You have covered labor markets and housing trends for the past two decades. From the standpoint of the current employment situation and housing supply (including apartments), does the current environment seem comparable to any previous time during those two decades?

After a tough 2023, this could be the year performance comes more back into balance, but there is still a tough road ahead in many places.

The spike in hiring a few years ago, combined with the increase in wages and other factors, put housing demand into hyper drive and caused apartment occupancies to reach levels never seen. Phoenix reached nearly 97%. Developers recognized the need for more housing, and more than a million apartment units started construction across the country. Currently, Phoenix has more than 30,000 units under construction. Unfortunately for operators, apartment fundamentals started to shift just as the wave of deliveries began to hit the market in 2023.

What’s unique at this point is many locations in the U.S. are still adding a considerable number of jobs, but apartment performance is at one of its lowest spots in years. While the number of jobs added in many places is significant, it’s more about how quickly the pace has decelerated.

The combination of slowing demand and a major increase in new supply has led to lower occupancy rates and negative rent growth in most areas. Much of the gains in rents achieved in 2021 and 2022 are now being given back despite what appears to be a solid economy.

Recently you posted on LinkedIn about the jobs market in Los Angeles following revisions from the Bureau of Labor Statistics, which reflected unfavorably on L.A. How does Phoenix compare to L.A. for the strength and durability of its employment market?

The Phoenix market is starting with a larger base of employment and population, as well as more momentum in job creation. For apartment operators, this suggests that new supply could be absorbed faster than if the market was starting from a point of slower growth.

That’s great go-forward news for housing since rent growth and occupancy rates were impacted the past year as the market started to rebalance after some very strong growth following the pandemic.

When you look at the correlation between wage growth and rises in housing costs, does the current economy stand out or has the correlation been pretty consistent over the years?

The current environment certainly stands out from other periods. Wages are still growing at a faster rate than the long-term average, but rents have been declining in many locations. In multifamily, new supply is one of the key factors impacting rent levels. 

From a long-term perspective, wages and housing costs tend to move in the same direction, but not always at the same magnitudes for various reasons

What advantages do platforms such as Radix offer to today’s clients compared to what was available 10 years ago?

Our firm’s benchmarking product saves onsite teams an estimated 8 to 10 hours per month by providing a way to easily share information such as current rent levels and concessions by floor plan. In the old days, each property had to do separate weekly call-arounds to each other which duplicated work.

Register to attend on 4/18 and learn where the Phoenix job market is headed, what challenges lay ahead for the housing market, if the pipeline of new housing can keep up with the new jobs being created, what changes are on the horizon for the local multifamily and build-to-rent markets, and more. Be there to hear from regional and national Economic leaders from Radix, JBREC, GPEC, and Zonda Advisory when they take the stage at Connect Phoenix Multifamily & Single-Family Build-to-Rent on April 18 in Scottsdale.  Register Now!