THE AMERICAN economy last year may have suffered its deepest downturn since the Depression, but you would not know it from house prices. In April the median house price climbed to a record high, according to the National Association of Realtors, and at an annual rate of 19%, the highest since at least 1999. Lower interest rates have encouraged people to take out bigger mortgages, and trillions of dollars of stimulus have let people spend more on housing.
America’s statisticians, like those across the rich world, do not include house prices in inflation metrics: the thinking runs that house purchases are in large part an investment, rather than purely a consumption good. Instead they focus on two other measures of housing costs. One is the rents actually paid by tenants. The other is an estimate of what homeowners would need to pay in order to rent their house.
Over the long run, however, economic theory suggests that rents and prices should move in tandem . If rents catch up with prices, that could have a big effect. They make up one-fifth of the basket used to calculate “core” personal-consumption-expenditure inflation, which excludes food and energy—the gauge most closely watched by the Fed. If annual rent inflation rose to 4% a year—not far off where it was shortly before the pandemic—overall core inflation would rise by 0.5 percentage points.
Rental inflation is thus likely to rise in the coming months. By how much is another question. There are reasons to think the price-to-rent ratio could settle at a permanently higher level. When interest rates are so low, for instance, people are willing to pay more for the right to a given stream of income. American price-to-rent ratios are higher today than in the 1980s, which coincides with lower real interest rates.
the rent is still way too high
good
Thank the 43 and the 45 along with private equity and hedge fund firms for buying up everything they can with billions of taxpayer money while millions of people have to pay high rents. PressSec SecYellen SecFudge AmbRice46 SpeakerPelosi SenSchumer
Landlord class in position of dominance. You lot should be thrilled at durability of rentier capitalism.
Not here to pay dads child support.
thanks
Well we did print our way out...