A look at Zillow Group’s closely-followed rent index shows that the roughly 17% annual jump in rental prices last year was probably peak, with the rate decreasing dramatically over the past six months.
The trend could give renters moving to a new city with more breathing room or someone better shot at recording a space on their own. But here’s a cooling rental market, the proof of which is Zillow Z,
Metrics, or others like it, won’t have a ton of sway with the Federal Reserve in the fight against inflation.
Speaking over the phone, Kevin Gordon, senior investment research manager at Charles Schwab & Co., said, “We can be happy how this directly affects us.” “But those metrics, those sources, are not what the Fed is tracking, and that goes into the CPI.”
very big shelter component The consumer-price index, a key inflation gauge for the Fed, largely hinges on this question for homeowners: How much do you think your home could bring in if it were rented?
Zillow, however, relies on monthly changes in rental properties’ list prices, as do others who rent properties or track data. This is why Zillow’s metrics (purple bottom) show a lag in growth, even though the CPI (orange) is climbing.
“This reflects substantial rent inflation in real terms over the past few years, but it also reflects on an annualized basis that it peaked in February,” Zillow senior economist Jeff Tucker said over the phone. ,
He also said that it is no surprise that the rent component of the CPI is still accelerating on an annual basis, as it tracks something else. “They’re trying to capture the experience of all the renters out there,” Tucker said. “But most people didn’t move in the last year, and they weren’t necessarily signing a new lease at current rates on a listing platform.”
In fact, instead of retreating as expected, the CPI for August outperformed Wall Street at an 8.3% annual rate, driven by increases in the cost of shelter, food and medical care. The climbing shelter component shows that homeowners are yet to feel the brunt of low property values, even as the boom in the housing market has faded due to increased borrowing costs.
The stock was slightly lower in choppy trade on Monday with the Dow Jones Industrial Average DJIA,
s&p 500 index spx,
and Nasdaq Composite Index Comp,
Investors flipped between gains and losses as they await a Fed rate decision on Wednesday. 10 Year Treasury Yield TMUBMUSD10Y,
was close to 3.5%.
The 30-year term mortgage rate was already back at 6%, even before the Fed on Wednesday expected another major rate hike. Its sharp climb this year put the brakes on monthly sales and dropped mortgage applications to their lowest level since 1999.
Reading: The Fed is ready to tell us how much ‘pain’ the economy will suffer. However, it still won’t indicate bearishness.
Schwab’s Gordon said the first signs of a sputtering housing market can be seen in declining home builder and consumer sentiment data, but also in the recent sharp decline in home sales volumes. The pullback is expected to eventually bleed into property prices, with gaps, and then rents.
“We’re still in that first part of the cycle,” Gordon said. “That is the point that we are trying to bring home with inflation. These gaps in monetary policy are going to take longer to start, even if people are expecting it to change rapidly.”
Credit: www.marketwatch.com /