Economist Warns Fed Rate Hikes Could Trigger 'Higher Rent Doom Loop'

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Apollo Global Management chief economist Torsten Slok is warning that further interest rate increases by Federal Reserve Chair Kevin Warsh could trigger a "higher rent doom loop," in which high rates suppress construction, tighten housing supply, and push rents and inflation higher. The Fed raised rates in September, its first hike in more than three years, and signaled more increases could follow this year and next. Realtor.com chief economist Joel Berner pushed back, saying the dynamic is not an imminent problem and is likely a few years down the road, because builders tend to add rental units as rents rise until construction costs outweigh rental profit. Average rents fell for the 37th straight month in August, with increases limited to San Francisco and San Jose, California, where the AI boom has driven rents up 4% year over year, along with Kansas City, Kansas, Pittsburgh, Pennsylvania, and Chicago, Illinois. Berner noted the roughly five-year lag between a rental permit and project completion, and U.S. Census Bureau data show housing completions fell 27.1% year over year in August.

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