Kaitlin Cindrich faces a monthly rent increase of $ 200 in August if she and her husband can renew the lease on their apartment in Provo, Utah. This 25% jump is not something she was expecting, and the 21-year-old worries that she will have to skip doctor's appointments for her autoimmune disease in order to keep up with payments.
Nonetheless, she acknowledges that there is not much choice but to pay more. " We hope to stay because everything is so expensive right now that I would pay the same as I was. here or elsewhere "Ms. Cindrich said.
The rental market, which collapsed during the pandemic, has recovered more faster than many economists anticipated, and tenants across the country are facing the shock of stickers. When the pandemic hit, many people who lost their jobs ended their apartment leases to live temporarily with their parents or roommates. Others fled the big cities for health reasons. Apartments became empty and landlords started offering incentives, like a free month, to attract tenants.
Now as people move on their own again or go back to livecities and office jobs, and as existing tenants find they can't afford to buy a home in a booming housing market, demand for apartments and single-family rentals rebounds - and even seems hot in some places. Last month, rents were up 7% nationwide from the previous year, according to data from Zillow. While this was measured against a weak June 2020, the gain was also a solid 1.8% from May.
"After a year, jobs are coming back strongly, and it is recreating the demand for rental housing and the occupancy rate is increasing," said Lawrence Yun, chief economist at the National Association of Realtors.
If rents continue to take off, it could be bad news for boththem looking for housing and for the country's inflation prospects. Rental costs play a disproportionate role in the consumer price index, so a significant increase in these could help maintain this closely watched government price indicator, which has risen sharply, for longer. Rents are only half as important for the Federal Reserve's preferred personal consumption expenditure inflation index, but a long period of high CPI. Inflation can influence consumers' expectations for future price gains, which in turn could accelerate them.
Consumer prices have done a bond rapid 5.4 percent in the until June, but much of the increase was linked to the reopening ofe the economy after the pandemic. Fed and White House policymakers have maintained that today's strong pricing pressures are expected to ease as the economy returns to normal, as one-off issues Rising used car prices are resolved and an increase in demand which increases the costs of furniture and washing machines begins to decrease.
Yet this is where housing costs could start in. Rent metrics and what's known as 'landlord's equivalent rent' - which uses rent data to try to determine the price landlords would pay for their home if they hadn't bought of house - constitute almost a third of the indexconsumer prices. Both tend to move slowly, but defy expectations that it would take time for them to bounce back.
"We are already seeing owner-equivalent rent increasing enough strongly, ”said Alan Detmeister, an economist at UBS and former Fed personnel officer. . "I think it will get worse later this year and early next year.
He and other economists said that it was too early to say to what extent, and for how long, rents would support overall prices.
"I think we will see a rising rents, and that will offset some of the declines in property categories, "said Michelle Meyer, head of the US economy at Bank of America. But the" only way "is for rents to rise enough to keep things going. 'inflation at oneUncomfortably high level, she added, is "if wages are consistently higher.
The amount owners can charge depends on what tenants can afford. The lowest-paid workers are seeing big wage gains, but many economists expect them to fade as the economy reopens.
Another key factor, Mr. Yun said: is whether" home builders are active in providing new homes and apartments to match this rent increase. " Daily Business Briefing
The data suggests that a substantial new offer from appartements are expected to increase this year, but it is uncertain whether it matches demand in terms of location and timing.
'instant, the rental experience Zillow data . Rents in New York and San Francisco are recovering quickly but are still cheaper than two years ago.
In New York, "the the lease was crushed, ”said Jonathan Miller, managing director of Miller Samuel, a local real estate appraisal company. But the pace of new leases over the past three months, with stories of auction wars , is turning the tide. Miller expects rents to fully recover as companies bring workers back to the office this fall, removing them from far and far away workplaces, he said.
"There is going to be another wave ", he said. he added. "We just passed the Zoom pic.
Data from Apartment List, an ad site, confirms the trend seen in Zillow figures: so far in 2021, nationwide rental prices increased 9.2%, compared with the 2 at 3 percent which is typical for Januaryto June. According to the most recent data available, prices were higher than what Apartment List economists might have predicted as pre-pandemic trends persisted. Image Movers in New York last summer. "In the short term, prices will continue to soar " said Igor Popov, economist at Apartment List. Credit ... OK McCausland for Hfrance.fr
" In the short term, prices will continue to skyrocket, as occupancy rates are very high right now "said Igor Popov, economist at Apartment List. He said the gains prices should moderate as the supply increased, but was notnot clear when this would happen.
In the meantime, the boiling housing market is expected to maintain strong rental demand.
" Rents are a drag on house price appreciation, "said Nela Richardson, chief economist at employment data provider ADP, who previously worked for real estate company Redfin . "You have a chronically undersupplied housing market for a decade. It is not going to go away.
Higher rental costs can have a big impact on people's lives. Christine Gitau, 23, of Homewood, Alabama, returns to live with her parents because she can either raise or $ 100 to renew her lease for the apartment to $ 530 per month that she started to rent last July.
"I am very frustrated, angry and stressed becausethat of rising rents, ”Ms. Gitau said.
Ms. Cindrich in Provo, a full-time student at Brigham Young University, worries that she will have to apply for more student loans to pay for her apartment or cut spending in other areas.
" I have severe autoimmune disease and spend hundreds of dollars each month on drugs, "she said. “The rent increase probably means that I may not be able to make my monthly doctor's appointments.
This human impact makes rising rents a political challenge, especially when the Biden administration is already pushing back Republicans' attacks on the explosion of inflation.
Administration officials say they are monitoring house prices and their effect on inflation . They continue to insistster about the fact that most of the price pressures in the economy are temporary.
Officials, and President Biden himself, have also Lobbyed for additional spending measures that, over time, would increase the supply of housing and, officials said, keep rent increases, house price spikes and inflationary pressures going.
Mr. Biden's $ 4 trillion economic program includes $ 213 billion to help launch more affordable housing. These efforts weren't included in the bipartisan infrastructure deal he struck with centrist lawmakers, but they could end up, at least in part, in a stand-alone spending bill that Democrats plan to present to Congress this summer.
Even if they are successful, these efforts would take years to bear fruit.
Some, like Dr Popov, expect recent gains to moderate from them same this year. Others said bigger increases could be coming: Many consumers are bursting with cash from government stimulus checks, and the Fed's cheap borrowing policies are heating up the housing market.
"There is a huge amount of stimulus, and I think this has the potential to put upward pressure on rental prices "said Mr. Miller, responsible for the evaluation.