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Rents Might Have Peaked, But They’re Still Too Damn High

Rents Might Have Peaked, But They're Still Too Damn High

It’s not hard to see that the Fed’s interest rate hikes have taken their toll on stocks and bonds — but the price of everything else has not seen the declines these markets have seen. Nowhere is that more obvious than in the housing market.

Mortgage rates climbed in conjunction with the Fed hikes, which has led to plunging home sales and price gains starting to reverse. In spite of that, housing prices have stayed hot. During COVID, the median purchase price of a house rose nearly 50%. Those prices have fell very little in spite of slowing demand to purchase homes.

And many Americans, who rent, the story isn’t much better. Rents are up 6.7% YoY according to inflation metrics reported in August. But that’s not all:

  • The median U.S. rent came to $1,781 in July 2022, showing signs that rents might have hit a pandemic peak.
  • Rents in some cities are up way more than 6.7%. Just ask residents in Austin, Texas, which have seen an 86% rise in median rent from August 2021 to August 2022. Denver (+45.7%) and Tampa (+44%) were a close second and third according to data sourced from rental company Dwellsy.
  • Markets hot with recent college grads polled by Axios/Generation Lab showed markets like Seattle, New York, and Boston were also head and shoulders above the rest in terms of rent hikes. They all booked double-digit rises from August to August.

What does that mean for investors? Well, practically speaking, it means you’ll have less to play with in the market — and less disposable income to spend or put into your 401(K) or Roth IRA. That means it’d pay to keep an eye on housing prices in the months ahead.

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