Landlords have pushed renters to their limit
In the long tradition of serfdom and slumlords, it seems that we've finally reached the point where renters cannot pay anything more for the privilege of not living on the street.
Rent gains are finally starting to slow in many parts of the US, cooling a years-long boom that sapped affordability from coast to coast. Landlords have little choice but to ease off big increases: Demand from tenants is suddenly sinking.
...Rents nationally increased 7.5% in September from a year earlier, above pre-pandemic levels, but down from a peak jump of nearly 18% at the start of the year, when vacancies also were lower, according to Apartment List. Preliminary October data show a dropoff that’s faster than the typical seasonal decline and would be the steepest in month-over-month data dating back to 2017, said Igor Popov, the listing platform’s chief economist.
A cooldown has yet to show up in the consumer price index that’s closely watched by the Fed, about a third of which is tied to the cost of shelter. That measure of rents rose at a record annual pace last month.
While rent hikes are finally slowing down, evictions are going up. In New York, landlords have kept 60,000 rent-controlled apartments off the market.
All of this is happening just as home prices have reached their peak.
At the national level, home values stayed roughly steady from August to September after dropping slightly in the previous two months. The typical home value is $358,283, up 12.9% from last year and nearly $110,000 (43.5%) above 2019.
New pending home sales fell 18% month over month and are down 29.3% from last year.
The price of anything rising 43.5% a year is an unsustainable bubble. The fuel of that bubble came from deep-pocketed investors. Investor purchases of residential homes as rental properties as a share of all residential home sales, rose from 10.5% in May 2021 to nearly 18% in May 2022.
The bursting of that bubble has come from rising mortgage rates. Monthly mortgage payment on a typical home bought in 2022 has almost doubled since 2019, going from $897 to $1,643.
"it would mean the euthanasia of the rentier, and, consequently, the euthanasia of the cumulative oppressive power of the capitalist to exploit the scarcity-value of capital. Interest today rewards no genuine sacrifice, any more than does the rent of land. The owner of capital can obtain interest because capital is scarce, just as the owner of land can obtain rent because land is scarce. But whilst there may be intrinsic reasons for the scarcity of land, there are no intrinsic reasons for the scarcity of capital..."
- John Maynard Keynes