To the Fed’s Janet Yellen, runaway inflation – at least that which can not be “hedonised” away by the BLS like iPad and LCD TV prices – may be simply “noise”, which probably explains why she doesn’t rent. But for the record number of Americans who are forced to rent as house prices are too high for the vast majority of the population while mortgage origination has tumbled to record lows (as banks can generate far higher returns on reserve by buying stocks than lending out said money), inflation is going from bad to worse. Case in point: as the WSJ shows, since 1990 asking rents - in real terms i.e., adjusted for inflation – have increased a whopping 15%. The change in median income over the same period? 0%.
This means that all else equal, the average American has 15% less disposable income after factoring rent compared to 24 years earlier.
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And since the demand for rental properties will only go up as even parent basements are getting full, it means the already record high rent prices will duly follow, taking even bigger chunks out of US disposable income, and thus, that part of the US economy, some 70% of it, which depends on consumer spending. The beneficiary? The personal bank accounts of owners of rental properties… such as BlackStone – America’s largest landlord.
Sure enough, as WSJ confirms, “apartment landlords continued to push through hefty rent hikes in the second quarter, squeezing U.S. households that already are struggling financially after four years of steady increases.”
The average monthly rent for an apartment rose to $1,099 in the second quarter, up 0.8% from the first quarter, according to data to be released Wednesday by real-estate research firm Reis Inc. That was the 18th consecutive quarter of rent increases. For the 12-month period ended in June, rents rose 3.4%.
No, it’s not just a New York phenomenon. It’s everywhere:
