A chart on rental vacancies from Ries via Calculated Risk
So what do we see directly: Rental vacancies are falling. The rental market is tightening up. We should expect higher rents and thus higher inflation in the near future.
However, the story does not end there. Household formation in incredibly low. There are maybe 2 million “missing households.” On top of that both single family and multifamily (apartment) complex completions are set to tie record lows for 2011.
There is a huge demand bulge waiting in the wings. There is no supply coming on line on absorb it. Rental vacancies are already falling.
This is setting up to be the story of 2012 and it is setting up to be a doozy. Inflation creeping higher despite the Feds best efforts to tamp it down. A possible explosion in the growth rate if we get a virtuous cycle of more construction job leading to more household formation, leading to more construction jobs.
Also, watch out for huge geographic shifts. With rents skyrocketing in the North East Corridor will the New South become the place of choice for young professional? A few a fundamentals are there. Not enough to make a prediction, but a few.
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Thursday ~ July 7th, 2011 at 7:45 am
rjs
yesterday you wanted wages to fall…with falling wages, even more people will double-up…
Thursday ~ July 7th, 2011 at 10:25 am
The boom to come [The Economist] | DreamInn
[...] your quote of the morning: This is setting up to be the story of 2012 and it is setting up to be a doozy. Inflation [...]
Thursday ~ July 7th, 2011 at 10:59 am
Boonton
OK can we get our terms straight. If demand for homes increases (and increased demand for rental homes means increased home demand, someone has to own a rental home after all!) but supply is not able to increase easily the result is not ‘inflation’…its a possible price increase in homes. Now since housing does represent something like 40% of the basket of goods and services in the CPI that may offset other prices tha tare falling. But since home prices have been negative for the past few years, you’ll need a certain amount of ‘home inflation’ just to get home prices to be inline with a ‘normal inflation’ rate of 2% or so. You’re not going to get inflation unless you start getting increases in the prices of the other 60% of goods and services in the CPI basket….or home prices really start shooting up.
Thursday ~ July 7th, 2011 at 1:27 pm
The boom to come - Economics -
[...] your quote of the morning:This is setting up to be the story of 2012 and it is setting up to be a doozy. Inflation creeping [...]
Monday ~ July 11th, 2011 at 11:08 am
On Mistaken Wealth — Mutual Information
[...] there are a lot of empty houses and (2) there are fewer households being formed. As it turns out, this is exactly what is happening. This is a mix of behavioural factors (households, like companies, don’t want to mark to [...]