Biden’s next inflation threat: Rent is too high – News Couple

Biden’s next inflation threat: Rent is too high

Housing costs for renters rose 0.4 percent in October from September, according to consumer price index data released by the Labor Department on Wednesday. That number, along with rising home values, made up nearly a third of the overall 0.9 percent jump in inflation last month, which saw a massive 6.2 percent increase from the previous year.

The continued rise in home prices is likely to be fodder for the Republican Party, which is already putting pressure on Democrats due to inflation. Sixty-three percent of Americans said they were very concerned about the rising cost of food and consumer goods in a Pew Research Center poll of more than 10,000 adults in late September, which also found President Joe Biden’s approval rating had fallen sharply. . Rent is the bulk of the monthly expenses for most renters.

The Biden administration has pledged to tackle the home affordability crisis in the United States, but the policies are still being developed and are likely to have limited impact.

“Inflation is hurting Americans’ money, and reversing that trend is a top priority for me,” Biden said on Wednesday of the latest consumer price data.

The cost of housing is increasing due to the historical supply deficit. New home construction over the past two decades has been delayed by 5.5 million to 6.8 million units compared to the past 30 years, according to a report released over the summer by the National Association of Realtors.

Home prices have risen more dramatically in the shadow of the pandemic, as white-collar workers whose finances have not been hurt in the crisis compete for homes with more space as mortgage rates have fallen to their lowest levels. The cost of goods related to residential construction, including energy, has also increased 14.5 percent so far in 2021, more than eight times faster than the first 10 months of last year, according to the National Association of Home Builders.

The twofold increase in housing prices prevented people from buying their first home, and so more rents began. There are a million more households renting today than there were at the end of the second quarter of 2020, according to brokers’ data.

The number of renters will likely continue to rise as more people return to cities to take advantage of recovering job prospects, Lawrence Yoon, chief economist at the National Association of Realtors, said, noting that people who doubled down with friends or lived in their parents’ basements during the crisis now add up. To demand rentals.

Rent increases are seen in cities like Detroit and Atlanta, both of which are battlefield states, while higher-cost cities like San Francisco and Washington, DC, have seen small declines over the past year.

“In the areas of accessible and affordable rentals, inflation has picked up a bit,” said Joseph Brusolas, chief economist at audit firm RSM. “That’s why public opinion is so nervous in some ways, and it’s a major concern for policymakers at both the Federal Reserve and the White House.”

The picture is not entirely terrible for the Democrats. Much of the increase in housing inflation has been fueled by “landlords equivalent rent,” which measures how much a person can charge to rent their home. It’s a side effect of higher home values, and a welcome development for homeowners. But if the market remains hot, this will drive rents up even further as some potential buyers are priced in.

Politically, the question is how rising home prices might connect renters and homeowners, said Dean Baker, chief economist at the Center for Economics and Policy Research.

“Your typical voter doesn’t look at the CPI, they look at what they pay for rent,” he said. “If you own a home, what you see is that the price of your home has gone up, so you might feel good about it. If you’re a renter, you’re probably angry.”

Government data may also be an underestimation of rent inflation. It takes some time for official CPI numbers to come out because it usually doesn’t rise until the lease is up. And housing price growth is slow to emerge.

According to inflation data, rents are still growing, year after year, at a slower pace than before the pandemic. But the latest month-to-month readings are some of the fastest in the past 20 years, and industry data paint a worrying picture.

The annual National Apartment List Rental Report released this month found that the national average rent rose 16.4 percent from January to October — compared to an average increase of 3.2 percent during the same pre-pandemic period from 2017 to 2019.

The increase is expected to continue for years. The Dallas Fed in August forecast rental and owner-equivalent rent inflation to rise to 6.9% by December 2023 — the highest rate in more than 30 years — according to an official price index that the central bank is closely monitoring.

Recently, home prices and rents have been rising at a slightly slower rate month to month than they did in the summer, but it will take some time for the market to fully stabilize, according to Zillow economist Alexandra Lee.

“Even with the monthly coolness we are seeing in both markets, they are still operating at unprecedentedly strong levels that we expect to remain hot for several months to come,” Lee told me. “Even in this slowdown, there is still a historically significant amount of home value growth.”

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