Excess Supply = Lower Prices
New Supply IncreasesAccording to recent Redfin data, the growth rate of multi-family properties with more than five units is up 60% year-over-year. This suggests that there is a strong demand for rental housing, as builders would not be building at this rate unless they saw evidence to support it. Elevated mortgage rates may be contributing to this trend, as they make it more expensive to purchase a home.
Old Supply IncreasesAt the same time, the number of rental vacancies has reached a two-year high. This could be due to a number of factors, including consumers bracing for a recession and choosing more affordable living arrangements, such as living with parents, friends, or roommates.
The Data
Landlords are lowering Prices.
As a result of the increased supply of rental housing, landlords are lowering their asking rents in order to attract tenants. This has led to a decline in rental prices for the eleventh straight month.Zillow - same story
Mixed Bag
Price changes are falling in some regions but remain elevated in others. Rolling recession?
The decline in rental prices is likely to positively impact inflation, as shelter costs make up a significant portion of the Consumer Price Index (CPI), especially CORE CPI. The Fed's measure of shelter inflation is lagging, but the new Redfin data suggests that it is starting to come down. This could lead the Fed to pause its interest rate hikes in the coming months. Overall, the recent trends in the multi-family housing market suggest that there is a preference for cost-effective renting. This is likely to be a positive economic development, as it will help keep inflation in check, stopping the fed and easing expectations.
That's your CPI update, thanks for reading!Jeremy Fielder