**Rents Are Rising and So Are Mortgage Rates. What’s a Home Buyer to Do?**
**Rising rents are pushing many to buy a home even if the housing market is already tough**
**by Julia Carpenter, The Wall Street Journal, 2/2/2022**
**Rising rents are one of the main drivers in the recent bout of inflation. They are also spurring many renters to try to buy a home as quickly as possible.**
**Average monthly rents listed in the U.S. jumped more than 14% year over year in December, climbing to $1,877, according to data from Redfin. In many major cities, including Austin, Texas, and Miami, rents increased by more than 30%. ...** [end quote]
The rent increases are pushing renters into buying a home.
The Fed is planning to tighten. Mortgage rates are already climbing although still low by historic standards.
Housing prices are already at a historic high and rising fast. This puts renters who want to buy in a terrible bind.
Rental cost is 25% of the calculation of the Consumer Price Index (CPI). Homeowners are assigned an “owner’s equivalent rent” (not the actual price of their home, to strip out capital gains). The CPI will rise along with increasing rents.
Personally, I will benefit. I own my house free and clear, along with I-Bonds that will yield more with rising inflation.
But I feel sorry for renters, especially the young, poor and those on fixed incomes. They are caught in a terrible, tightening vice.
On a Macroeconomic level, personal consumption of goods and services will fall in households where a greater proportion of income is going to rent. That may slow the overall economy.