Rent Hikes Drove Inflation, But Have Now Leveled Off As Housing Market Stalls
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Rent inflation plays an outsized role in determining overall inflation, but the government's method for measuring it causes the Fed to misinterpret the data.
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The Fed should have raised rates sooner when rent hikes soared in 2021, and should stop raising rates now as rent inflation has leveled off.
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4 million new households formed in the U.S. from 2020-2022 due to the pandemic, increasing housing demand. This contributed to price and rent increases.
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High mortgage rates combined with high home prices have created a "mortgage lock" where current owners don't want to sell. This reduces housing supply.
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While increased single-family rentals provides more rental options for families, lower homeownership rates could mean less neighborhood investment.