The latest BLS and Cleveland Fed release of their quarterly new tenant rent index was lower by 2.43% year over year and over 5% from the prior quarter.
Unlike CPI shelter prices, which measure rental prices of all rental contracts . . . the new tenant rent index only measures recently signed rental agreements. . . . . Only approximately 5% of rents are renewed monthly. . . .
Seems inevitable.
Print a bunch of money.
Give it to the investment classes, some of that is going to be used to buy and build houses and apartments. (The supply shortage is a myth, The US currently has more homes per capita than at any tie in measured history.)
Yet if that money was given disproportianeyly to the investment classes and age groups (instead of the tenant classes and age groups) then demand will not keep up with the rapidly increasing supply.
Know the inflation rate in December was 0.4%. (It annualizes to almost 5% annually.)
Know that core inflation year-over-year was 2.9% in December. (almost 1 and half times higher than the target rate.)
Since shelter is nearly one-third of that,
and new rents are DOWN, not up . . .
What does that tell us about the price of everything else?
buying a home is a bad deal, in fact investors should consider selling
renting a home is a good deal. Tenants hosuld stay put.
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Most of economics is predicated on “mean reversion” which suggests "Those two lines touched for such a long time, the base case is that hey will touch again. If someone thinks they will not touch again, the burden is on them to explain what changed to makes the new price-to-rent ratio permanent."
Wow… apparently I need more coffee. I saw the Jan 24 and assumed I stumbled upon an ancient thread. I can’t figure out why the timeline thingy says Jan 24…
But anyway, my point was that the CPI uses a longer rent history such that as rent prices fall, the CPI over-estimates inflation over the month. It does not use current month rental costs.
CPI rent is based on a survey.
Contact a bunch of people and ask “how much are you paying for rent?”
Therefore
if “New Tenant Rent Prices Plummet” is a temporary blip it won’t have much impact on CPI rent.
if “New Tenant Rent Prices Plummet” is an extended thing, it will ahve an impact on CPI rent.
Either way the FEd way, way way overprinted a few yeras ago and everything else is just “What’s gonna happen because of it?” and “What should we do about it?”
But yeah, I think you might be right and it used to be that recent threads had the full date at the ends of the timeline axis, and only old threads had MMM YY at the ends of the axis. But I could be wrong about that. I don’t pay a lot of attention to that axis and only look at the date displayed on the post itself.
