Despite rising single-family costs, the report interestingly blames the migration of renters to homeowners on the 306-unit absorption in the first quarter in comparison to 3,120 units a year ago. John Kobierowski with the Phoenix office of Hendricks & Partners tells GlobeSt.com that low interest rates, averaging 6.7% last quarter, combined with IRS refund checks, create a historical flight to home ownership at this time of the year.

New housing on the outskirts of Phoenix is running between $65,000 and $70,000 per home. Many such projects are offering no down-payment mortgages to government employees from teachers to firemen.

Kobierowski also blames the low absorption on apartment sharing by renters as they attempt to weather the bad economy. It is not uncommon to find families moving in together in larger apartments to share rent burdens, he says.

Average occupancy rates in the metropolitan area last quarter were 8.8%. Kobierowski predicts vacancy could get as high as 10% in the next 12 months. Still, he sees a decline coming in those tenants getting to buy in the near term.

The construction pipeline holds less than 3,000 units for two years out, excluding those under way. And, says Kobierowski, the proposed building could be more of the affordable housing variety.

According to Hendricks' report, the Phoenix market continues to be concession driven as 91% of conventional properties are offering specials--a record for the region. Kobierowski says some class A properties are giving away up to four months free' rent for long-term leases.