Shelter costs make up a big chunk of the consumer price index. So with rents rising dramatically over the past year (along with housing prices), it's no wonder that CPI numbers continue to come in higher than expected. But there is some confusion about whether rent increases are finally peaking or not.
The government said in the CPI report that both rent and owners' equivalent rent (which measures how much a homeowner estimates they could get if they rented their property) rose 0.8% from August. The increase in owner's equivalent rent was the biggest since June 1990.
But a report from real estate brokerage firm Redfin (RDFN), also released Thursday, showed that the median monthly rent nationwide fell 2.5% in September.
“The rental market is coming back down to earth because high rents and economic uncertainty have put an end to the pandemic moving frenzy of 2020 and 2021, when remote work fueled an enormous surge in housing demand,” said Redfin deputy chief economist Taylor Marr.
“We expect rent growth to slow further into 2023 as Americans continue to hunker down and more new rentals hit the market,” Marr added.
If that's true, inflation pressures could finally start to subside more dramatically. Investors may be hoping that's the case, which is one reason to justify the big stock market surge Thursday.
"There is a disconnect. With Redfin coming out and saying there is a decline in rents, maybe the Fed has something to glob on to that will allow it to slow the rate hikes," said Lamar Villere, portfolio manager with Villere & Co.
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October 14, 2022 at 03:15AM
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