Since many families moving to or within Metro Phoenix have the option to rent or own, and they investigate the monthly cost of each before deciding, the difference between the two is a good indicator of where home prices are headed. In 2007, just as the bubble was bursting and beginning a two year freefall, renting a typical detached home (approx 2000 SF in size) averaged 38% less than a mortgage payment for a smilar, newly purchased home**. This made ownership less appealing and many took shelter in affordable rental properties while the dust of short sales and distressed properties settled.
**PITI + HOA Monthly Mortgage Payments calculated from closed ARMLS sales and leases of detached homes, assuming a 10% down payment and historic interest rates from www.freddiemac.com, adding $300 per month for property taxes, homeowner’s insurance, and HOA dues. Actual monthly costs will vary, and ownership cost may be further reduced after mortgage interest tax deduction.