Bloomberg’s Joshua Zumbrun smells what’s cooking
For all the attention given to almost $4-a-gallon gas, the biggest threat to containing U.S. inflation may be the shift away from homeownership, which is pushing up the cost of leases across the nation’s 38 million rented residences.
Shelter represents about 40 percent of the consumer price index excluding food and energy and accounted for almost one quarter of the 1.3 percentage point rise in April. That share has grown as falling home prices shake Americans’ confidence in housing as an investment.
The last sentence doesn’t quite make sense. Perhaps, the author doesn’t realize that Owner Equivalent Rent is also in the BLS inflation measure. That’s not meant disparagingly. Lots of folks get tripped up on this stuff.
In any case the point is that rents are rising, and rents are hefty portion of inflation.
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Wednesday ~ June 1st, 2011 at 3:20 am
Economist's View: "On Rising Rents"
[...] Rising Rents, by Tim Duy: Karl Smith at Modeled Behavior notes Bloomberg’s story on rising rents, summarizing it [...]
Wednesday ~ June 1st, 2011 at 9:41 am
IVV
But we can’t possibly have an inflation spiral because wages aren’t rising, right?
Could never happen. Inflation is quite perfectly contained. The price at the pump and for rent and for food can’t go up further. Cue the singing children.
Wednesday ~ June 1st, 2011 at 8:08 pm
Th
Interesting that you foresee inflation from lack of loose money inspired investment (new apartment construction) rather than loose monetary policy leading to inflation. Damned if you do…
Thursday ~ June 2nd, 2011 at 9:15 am
bakho
Price/rent ratios are still above trend. Housing prices still need to drop in some areas. Absent housing price drops, rents will rise. Actually, housing inflation is a good thing because it will help solve the housing bubble bust. It is difficult to deflate housing prices.
The response of many people to higher rents is to double up.