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PHOENIX-Valley multifamily owners saw apartment occupancy levels and rental rates rise during the second quarter, reflecting a modest upward trend that indicates the housing market may be on the verge of stabilizing.

According to a report by multifamily housing specialist RealFacts, Phoenix was the only market in the Western US to show a positive increase in both average rental and occupancy rates in March for complexes with 100 or more units. A modest recovery in the second quarter allowed other markets in southern California and Greater Houston to share that distinction.

“For two quarters in a row, occupancy and rents have gone up in Phoenix, which is good news for a beleaguered market, but the occupancy rate is still low,” Caroline Latham, owner of RealFacts tells GlobeSt.com. “At around 90%, it still has some distance to go before there’s real pressure on rents. When occupancy gets to 95%, you can be pretty certain that competition for vacant apartments will be stiff enough to permit landlords to increase their prices.” Latham predicts occupancy rates and rents could make larger gains as soon as 2004 due to a slowdown in construction projected for the next three years.

The study, which surveys complexes containing at least 200 units, shows the average monthly rent for an apartment in the Phoenix market is $714, up about $3 or 0.5% from the earlier quarter and equal to a historic high achieved in third quarter 2002.

More significant, however, is average occupancy levels rose for a second time this year to 90.5%, up from below 90% in mid-2002 and 0.3% higher than last quarter’s level of 90.2%, the report notes. That increase in occupancy is significant in light of the increasing supply of new units that come on the market every year. In an area where land is readily available and housing units take only about a year to complete, the pressure on occupancy levels has been tremendous for the last decade. Last year alone, the number of large apartment complexes built since January rose nearly 10% to put even more pressure on Valley occupancy rates as tenants searched for rental giveaways.

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