The most stubborn part of U.S. inflation is showing signs of turning

time:2022-12-09 author:Individual stock recommendation
The most stubborn part of U.S. inflation is showing signs of turning

After the sweltering summer, rents for Manhattan apartments in New York have finally "leveled out". According to media reports, in August, Manhattan's hot rental market ended six consecutive months of record rents, with rents falling slightly from the previous month. The median rent for new leases signed in Manhattan in August was $4,100, down $50 from an all-time high in July, according to a report released Thursday by real estate appraisal firm Miller Samuel and brokerage Douglas Elliman Real Estate. While median rents in August were still 17% higher than prices three years ago, meaning there was little relief for tenants, the good news is that the rapid price increases have stopped (at least for now). That may herald a turnaround in the most stubborn part of U.S. inflation.

Rising rents-the "fuel" for hot inflation

Wall Street News mentioned earlier that the rise in rent prices is a microcosm of this round of great inflation in the United States, of which Manhattan, New York, is a typical example of the "high fever" of rent prices. . The weight of rent in the U.S. CPI basket is as high as 32%, and it has a strong stickiness. Analysts have previously pointed out that rising rents may form a strong support for inflation. Over the past year, multiple factors have contributed to a surge in U.S. rents. First, the demand for rental housing in the United States is rising day by day. As the epidemic improves and people return to work in big cities, there is a surge in rental demand in some areas with a shortage of housing supply. Second, the crisis has been compounded by many would-be homebuyers returning to the rental market as mortgage rates rose at their fastest pace in decades as the Federal Reserve hiked rates sharply. The housing inventory is relatively tight, and the pace of new home construction in the United States has slowed since the housing bubble burst in 2008. During the pandemic, low lending rates and an increasingly slow pace of new home construction have further disrupted the market’s supply-demand balance. In addition, landlords hope to make up for the loss of rent during the epidemic by raising prices, which is also one of the key reasons. Although the U.S. rental market has shown a certain cooling trend as the Federal Reserve continues to raise interest rates - the average increase in apartment rents nationwide in the second quarter was 9.4%, down from the annual growth rate of over 11% in the previous two quarters. New York rents are "rising and rising" as a sign that rents are still firm. Therefore, the small decline in the median rent in Manhattan, New York in August, gave market participants finally a glimmer of hope.

President Miller Samuel: Unless a recession materializes, rents are not expected to plummet

It is worth noting that the stickiness of U.S. rent prices remains high. "Rent growth is strong, but it's starting to stabilize," said Jonathan Miller, president of Miller Samuel. But he doesn't expect rents to plummet unless recessionary trends materialize, such as rising unemployment, leaving people struggling to pay rent for existing apartments and Billings face bigger challenges. Hal Gavzie, executive vice president of residential rentals at Douglas Elliman, has seen the market change over the past few weeks, with the frenzy for listings and homes for sale slowing from June and July. Landlords haven't cut rents yet, he said, but "concessions are slowly starting, which doesn't surprise me. All the time, we've been wondering how long we can keep rents high." But he added: " Rents aren’t going to bottom out.” “Landlords are still raising rents.” Miller added that the percentage of new leases with bids is still at levels seen earlier this year, accounting for about 20 percent of transactions, and the average rent is about 12.6 percent above asking price. , suggesting that "the market remains very tight". Analysts say it may be better to wait until 2023 to lock in a new residential lease in Manhattan, as the likelihood of a Fed-induced recession rises in the coming months. This article is from Wall Street News, welcome to download the APP to see more
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