The nation's housing market is cooling down as construction activity has decreased, inventory remains tight, and affordability, while loosening due to lower interest rates, is still a headwind. Economists say rental prices may rise over the next year as a result.
Pantheon Macroeconomics estimates more than 4 percent annual growth in rental prices by 2020. The economic research consultancy's chief economist Ian Shepherdson tells Business Insider, "The flat trend in multi-family permits is a key part of our view that the rate of increase of CPI rents is set to rise this year." Recent Commerce Department data show that multi-family construction increased in February, but the number of permits issued was lower than in January. Housing starts were down nearly 9 percent in February.
With the unemployment rate at historic lows and signs of upward pressure on wages, the housing market has been a soft spot in an otherwise humming economy.
A growing disconnect between the two could muddle the outlook for consumers and further delay investment, according to Jonathan Miller, the chief executive of Miller Samuel, a real-estate and appraisal firm. "Consumers are still looking to buy, but they're waiting until they're more comfortable," he said. "People have a lot to process, and the sense of urgency to buy hasn't been there in more than a year."
Advertisement
Related Stories
New-Home Sales
Mortgage Rates Are Up but New-Home Sales Still Solid in March
Lack of existing home inventory drove a rise in new-home sales, despite higher interest rates in March
Labor + Trade Relations
Who's Earning What in Construction
Workers in construction management roles may earn a higher median wage, but on average, lower-paid occupations have experienced somewhat faster wage growth
Build to Rent
Build-to-Rent Is Booming, Particularly in These Metros
A recent report finds that the Phoenix metro leads with more than 4,000 build-to-rent units completed in 2023, and Texas is the leading state for build-to-rent development