Fast-rising rentals are adding to inflation pressures. Rentals are becoming unaffordable. Have the increases peaked?
Inflation-Driven Record Rents Mean More People Are Piling In With Roommates
Apartment demand in the third quarter was lowest of any quarter since 2009
by Will Parker, The Wall STreet Journal, 10/25/2022
After a long stretch of record-high rents, Americans are renting fewer apartments.
Some are choosing to take on roommates, while others are boarding with family or friends. More people are opting to stay longer in their parents homes’ or moving back in, rather than pay the steep rent increases many are experiencing…
Rents have risen 25% over the past two years, according to rental website Apartment List, pushing many renters beyond what they can now afford. Meanwhile, inflation on other essential goods, such as food and energy, is also eating into how much people have left to spend on housing…
Apartment demand in the third quarter, measured by the one-year change in the occupancy of units, was the lowest since 2009, when the U.S. was feeling the effects of the subprime crisis…Meanwhile, the apartment-vacancy rate rose to 5.5% in the third quarter, up from 5.1% the quarter prior…Yet even with the recent dip in demand, asking rents have remained near record highs…
To escape record high prices, more people are choosing to live rent free with friends or family, a September UBS survey found. Eighteen percent of U.S. adults surveyed said they had lived rent free with other people during the last six months…Other renters are finding roommates or splitting rent with family members. …[end quote]
Living rent-free in someone else’s house is considered “couch surfing,” one step away from being homeless. It’s pretty shocking that almost one out of five adults in the U.S. did this in 2022.
Living with room-mates has been a traditional way to afford rent. And back in my grandfather’s day, poor workers would rent a “shift” to sleep in a bed shared with two other men. They had a saying in Yiddish, “Sleep fast, I need the pillow.”
The iron law of supply and demand will eventually bring rents in line with affordability. The market is elastic since renters can adapt as they always have instead of being forced to rent a whole apartment.
Since rents are a large part of CPI and the PCE index, the Fed will continue to tighten as long as rents rise, driving inflation. But maybe rents have finally peaked. Time will tell.
Wendy