In 34 of the largest 100 cities, rents spiked by 15%-28%. Tenants get to pay for your reckless monetary policies that made the wealthy far wealthier.
By Wolf Richter for WOLF STREET.
In January, the median asking rent for one-bedroom apartments increased by 10% or more in 56 of the 100 largest cities in the US, compared to a year earlier. In 34 of the 100 largest cities, one-bedroom rents spiked by 15% or more. In 20 of those cities, rents spiked by 20% or more, and in 11 of them, rents spiked by 25% or more. Many of the cities with the largest year-over-year rent spikes are medium-size cities with more modest incomes.
At the top is Fresno, CA, where the median asking rent for one-bedroom apartments in January skyrocketed by 28% in 12 months, and by 41% in two years, from $1,000 in January 2020 to $1,410 in January 2022, according to data from Zumper’s National Rent Report. Rent increases like this are nuts:
This is a serious freaking problem, Mr. Chair Powell Sir. These renters are not wealthy people who made millions or billions of dollars thanks to your radical monetary policies. These are the working stiffs that now get to pay for your policies that made the already wealthy far wealthier.
In the US overall, across the 100 largest markets, the median asking rent for one-bedroom apartments jumped by 12% year-over-year, according to Zumper’s National Index. The index for two-bedroom rents jumped by 14%.
“Asking rents” are advertised rents for apartments listed at various rental listing services, including Multiple Listing Service. They show the current pricing of the market, like a price tag. They’ don’t include rents that tenants have been paying for months or years. Zumper’s data is limited to apartments in multifamily buildings and do not include single-family houses for rent. “Median” means that half of the apartments are listed at higher rents, and half are listed at lower rents.
The 34 cities were rents spiked by 15% to 28% year-over-year.
Can you even imagine a 20% or 25% increase in rent, Mr. Chair Powell Sir, when your pay goes up a glorious 6%, what that would require of your belt-tightening strategies?
These are the 34 cities, of the largest 100 cities, were the median asking rent for 1-BR apartments spiked by 15% to 28% year-over-year. Mr. Chairman Sir, these are massive crushing rent increases that are now hitting a lot of people who are struggling to pay for them. If your pay goes up 6% and your rent goes up 25%, Mr. Chairman Sir, you’re screwed, Sir. But that’s what is happening now:
|The 34 Cities where 1-BR rents jumped 15% – 28%|
|1-BR $||Y/Y %|
|10||New York, NY||$3,260||25.4%|
|15||St Petersburg, FL||$1,500||24.0%|
|16||Las Vegas, NV||$1,240||24.0%|
|25||El Paso, TX||$820||15.5%|
|31||San Diego, CA||$2,070||15.0%|
Rents didn’t spike in all cities.
In San Francisco, the median asking rent rose 6% year-over-year in January, to $2,850, but has been relatively stable for the past 8 months – and is still down by 23% from the peak in June 2019. But that peak in 2019, at $3,720, was totally crazy. It was locally called the “Housing Crisis,” because middle-class San Franciscans couldn’t afford to rent a one-bedroom apartment. So this drop in rents brought some much needed relief to renters, and to the rest of the local economy because it leaves renters a little bit of money to spend on other things:
In Newark, rents plunged 25% year-over-year, but just back to normal from the ridiculous peak a year ago when landlords got drunk with the notion that Manhattanites who could work from home would flee to Newark, and so they jacked up their asking prices to fleece those Manhattanites, and it didn’t work. Now rents are back where they’d been in 2019.
Here are the only 8 cities of the 100 largest cities were rents fell, including our special case, Newark:
|The 8 Cities where 1-BR rents fell|
|1-BR $||Y/Y %|
|5||St Louis, MO||$920||-7.1%|
|6||Kansas City, MO||$950||-5.0%|
|8||New Orleans, LA||$1,400||-1.4%|
The largest 100 rental markets.
Below are the largest 100 rental markets that Zumper tracks, with 1-BR and 2-BR median asking rents in January, and year-over-year percent changes, in order of the price of 1-BR rents (if your smartphone clips the 6-column table on the right, hold your device in landscape position):
|The 100 largest markets: 1-BR & 2-BR median asking rents|
|1-BR $||Y/Y %||2-BR $||Y/Y%|
|1||New York, NY||$3,260||25.4%||$3,400||27.3%|
|2||San Francisco, CA||$2,850||6.3%||$3,930||12.3%|
|4||San Jose, CA||$2,390||12.2%||$2,870||7.9%|
|7||Los Angeles, CA||$2,220||14.4%||$2,940||8.9%|
|9||San Diego, CA||$2,070||15.0%||$2,900||20.8%|
|11||Fort Lauderdale, FL||$1,940||14.8%||$2,810||27.7%|
|12||Santa Ana, CA||$1,940||14.1%||$2,600||15.0%|
|16||Long Beach, CA||$1,700||6.3%||$2,320||14.9%|
|28||St Petersburg, FL||$1,500||24.0%||$2,190||25.1%|
|36||New Orleans, LA||$1,400||-1.4%||$1,800||5.9%|
|41||Virginia Beach, VA||$1,280||13.3%||$1,450||11.5%|
|45||Las Vegas, NV||$1,240||24.0%||$1,530||27.5%|
|49||Salt Lake City, UT||$1,210||13.1%||$1,510||13.5%|
|55||Fort Worth, TX||$1,180||9.3%||$1,550||10.7%|
|62||Colorado Springs, CO||$1,090||0.0%||$1,390||6.9%|
|65||San Antonio, TX||$1,070||12.6%||$1,370||18.1%|
|75||Kansas City, MO||$950||-5.0%||$1,200||3.4%|
|77||St Louis, MO||$920||-7.1%||$1,250||0.0%|
|82||Corpus Christi, TX||$900||5.9%||$1,150||3.6%|
|83||Des Moines, IA||$900||1.1%||$950||1.1%|
|84||Winston Salem, NC||$890||11.3%||$980||12.6%|
|91||Baton Rouge, LA||$840||5.0%||$990||4.2%|
|92||El Paso, TX||$820||15.5%||$1,030||18.4%|
|95||Oklahoma City, OK||$800||3.9%||$960||6.7%|
And just in case you missed it, Mr. Chair Powell Sir, here is the result of what you have accomplished with your radical monetary policies that tenants (among others) are now paying for: The biggest fastest wealth disparity ever, as the richest got far richer since Q1 2020, while nothing much has changed for the lower 50%, except that their expenses, such as rents, are now soaring:
Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:
Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.
I said it before and I’ll say it again… the Fed’s continued purchases of MBSs into an obviously glowing hot real estate market was tantamount to a criminal act. The least they could have done, even if the wanted to keep the same level of QE was to shift purchases from MBSs to treasurys but they couldn’t even manage a feeble act as that.
These guys are supposed to be ‘data-dependent’. Yeah, right… data-dependent my @$$.
Agreed, one of countless crimes committed by the FED, who works exclusively for the 1% richest of the world.
“who works exclusively for the 1% richest of the world”
And they’re doing a magnificent job, too. Unfortunately, for the rest of us…
It’s clearly time for the reset based on all the comment on here today.
That’s not even the 1%. I don’t know where the decimal point should go. 1% is only 1 out of a hundred. That would be the owner of the hardware store or a small time landlord.
1999 and 2006, inflation an issue but well below today’s levels.
30yr mortgages 6%.
2006, the Fed owned NO MBSs. Now they own 24% of all residential MBSs.
What changed? How can this be considered anything but abnormal?
Who is in the Fed’s “tent” and who benefits from large MBS purchases and the subsequent low interest rates which pump the real estate market?
The obvious answer is anyone who has a large bet on in residential real estate. So, who, with a large position in residential real estate, walked into the Fed’s tent in March of 2020?
It is ridiculous for the Fed to have 30yr mortgages 4% below inflation.
Ii think what Mr. Powell said is true. Treasury securities and Government backed securities compete in the market place for similar risk adverse investors. If they had purchased all treasuries it would have still had similar affects on MBS market.
They probably thought there would be less market distortion if they plot the purchases up.
Oops. …split the purchases up.
Blackstone walked into the tent back then.
Because of Dodd Frank, far less MBS are on bank balance sheets … it is just too expensive to hold them, even in trading accounts. So, the FED has to step in and hold those MBS.
The only way to have the FED get out of the MBS business, bank regulations would have to be eased.
If bank regulations stay the way they are, and the FED got out of the MBS business, the MBS market would not function correctly and the housing market would have a big problem.
the housing market dropping to their real values is not a “big problem.”
Anyone here know what the markets would look like if banks and nonbanks did not originate and sell to GSEs?
What would the housing market look like if everyone had to portfolio every mortgage they originated?
“It is ridiculous for the Fed to have 30yr mortgages 4% below inflation.”
I agree but if you raise interest rates houses will just become that much more unaffordable for the first time buyer. Raising interest rates is not going to increase the supply of housing.
The interesting thing is that we can talk all day long about how there is not enough housing, not enough food, not enough Healthcare, not enough schools, not enough infrastructure, not enough parks, not enough clean air,, not enough energy etc,, etc,, etc but no one will ever talk about the possibility that maybe there are just too damn many people.
And yet every year we look for more and more ways to subsidize population growth.
I don’t see how this can continue. Glad I am old but I sure feel sorry for my grandkids.
There is a tremendous amount of speculation in residential real estate right now….pyramiding, etc.
Rates being out of historical norms can only serve to distort historical norms.
Rates being up just might allow people to SAVE and also bring prices down.
Raising interest rates such that real interest rates are not negative (which is a completely uneconomic, distorted situation) will indeed make houses more unaffordable. But that’s OK. When houses become unaffordable then (assuming the Fed stops making stupid/nefarious decisions) market forces will take care of the situation by dropping the price of homes naturally. Problem solved.
That’s how a capitalist system, which allocates resources most efficiently compared to the alternatives, is supposed to work. It fixes itself – assuming it’s allowed to do so.
this is just completely wrong. low interest rates don’t make houses more affordable for anyone other than leveraged corporate investors. all they do is cause the prices to rise to meet the monthly payment buyers can make. so no one benefits other than current homeowners.
I think you guys are missing the point with all this talk of interest rates and inflation. We’re two years into a money printing spree that would make Neil Cashcari blush. You can’t just print dollars out of thin air, pay people not to work and expect everything is going to work out well. Buy BTC.
BTC’s purchasing power plunged 45% over the past few months while the dollar’s purchasing power declined 2%. I cannot believe people are still trying to promote this shit here.
There’s plenty of housing on the market. The problem is that it’s not geared towards the average working person to rent or purchase. It’s for wealthy and corporate investors to gobble up.
Wolf holds onto his short because in the long run he expects it to payoff, regardless of painful results short term. He keeps the short as a percentage of his investments small. It’s a hedged bet with a big potential payoff. That is exactly how some of us approach our BTC investments so save us the preaching.
In Maryland and no doubt in other states, taxpayers are supporting rents. In same buildings, some are paying lower rent based on low income, and gov’t is making up the difference for landlords. Not sure of gov’t program names, state or federal, maybe section 8? So taxpayers (us) are making landlords rich. Without that support, I suspect rental rates would fall due to true supply and demand. Maybe this is also a reason for immigration, to fill all those newly built apartment buildings at taxpayer expense?
I do find it funny that you chose both years right before big bubbles popped.
Agreed! It makes me furious when we hear them talk because no reporter every asks them the real questions to corner them about what they’ve done. There is no way to logically explain it like when for years they kept saying how amazingly strong the economy was … while not lifting off the gas a bit.
The whole thing is just ridiculous … and now I fear the administration will suffer for it even though it has much more to do with the last (even though they don’t have much to do with it at least this one is trying to do a few things that might help the average guy against corporate America ), hardly anyone outside readers here understands anything about Fed policy or why and how it’s doing what it does.
The mainstream news organizations (including Fox), reporters, the FED and the administration all work for the same class. Get it?
which is why they talk about crushing home inflation as “price growth.”
@ Jake W-
yes, they are a bunch of bastards,
and we at large are a bunch of sheep.
That’s why, In Orange County or the Bay area of California, you get a barber, truck driver, nurse or school teacher who bought a house 30 years smug in the knowledge that they’re a Millionaire. Digitized dollars. Big numbers, little purchasing power. But it’s great at making a tough road for young who are not born into wealth.
Yes, they work for the same class. They’re similar to millionaire black NBA players who work for a Jewish/white class that’s worth billions. The Fox announcer who pulls $10 mil a year feels rich, but really isn’t. And he’d damn well better toe the line, or else.
Do they work for the same class, or are they the same class? (or want to be)
Wow! Seriously? Yeah, that last administration was really bad, all right. I hated that energy independence, low inflation, and secure borders.
“…and now I fear the administration will suffer for it even though it has much more to do with the last (even though they don’t have much to do with it at least this one is trying to do a few things that might help the average guy against corporate America ), hardly anyone outside readers here understands anything about Fed policy or why and how it’s doing what it does.”
Hahaha. Get a clue. The current administration just nominated Powell for another term.
“There’s a floor under the stock market.”
~Speaker of the House Nancy P.
As long as you sheep are stuck on partisan stupid, nothing will ever change. “Divide and conquer” is the game the Uniparty is playing, and you fell for it hook, line and sinker.
““There’s a floor under the stock market.””
Remarkable … and the “floor” keeps getting raised.
Who tipped Nancy to the “floor” being there…..and when did she find out?
“So as a result of all these efforts, today, home sales are up nearly 50 percent from where they were in the worst of the crisis. Homebuilding has more than doubled…Since 2012, nearly 10 million fewer Americans have their homes underwater. Rising home prices have put hundreds of billions of dollars of wealth back in the pockets of middle-class families.
Now, I want everybody to be clear — this progress is not an accident. It is not luck. It’s what happens when you have policies that put middle-class families first.
And what’s true in Arizona is true all across the country: We’ve still got some more work to do, our job is not done, but what we’re doing is working. And we’ve got to keep at it. We’ve got to stay at it.
So even though you’ve already got your mortgage or your loan, already have your home, if your neighbors are buying more homes, that’s lifting the whole market here, which means the value of your home starts going up. And that’s good for you. It means fewer foreclosure signs as people fix up old properties. It means more construction, which means more jobs, which means a better economy. So this is the kind of boost that we need to keep the momentum that we have seen over the last several years — keep it going here in Phoenix and all across the country.
In the end, everything we’ve done to heal the housing market is about more than just restoring housing values. It’s about restoring our common values. It’s about who we are as a country and who we are as communities.”
January 8, 2015
This is all by design, and has been ever since the last housing meltdown. Crackpot eCONomists like Paul Krugman and Bernanke are on record saying the solution was to blow another housing bubble, and Obama was right there to sell it to the masses as a good thing. Blaming this on the past administration is laughable. Sure, they added fuel, but this goes way back.
Thank you, Depth Charge. Tactful, evidence-based and to the point.
My real estate assets have more than doubled just in the past 3 years thanks to the Fed. I am now ready to begin the process of divesting my portfolio and according to my advisor it should bring me close to 12-15 million.
The younger generation is looking to buy their first home and is having the market driven away from them by this irresponsible Fed policy. Plus, they can’t save their money for it goes backwards due to inflation and zero savings returns, both courtesy of the Fed.
And where is the money coming from to have homes and stocks “bid away” from the younger generation? From their future, that’s where! The future wealth, their future wealth, is being used against them.
Well said. It is the deliberate actions of the FED to make them slaves. Slaves to work, debt, rent (either on property, interest on money, or both), taxes, and perhaps even service in the armed forces to risk their lives to protect the wealth of the masters.
The FED is turning Citizens into subjects. (copyright)
or, more accurately The FED has turned Citizens into subjects. (copyright)
Capitalism is not about making your money work for you. That is a false saying. It is about other people making your money work for them. Banks, stocks, bonds are all about them borrowing your money and using it to get a high return from that money so that they can pay you a little for the use of your money and make a lot themselves.
Another observation: government is business’ way of extracting vast amounts of money from the public that they could never get any other way.
@ Peter M-
Capitalism is about ownership.
I think if I was young and saving for a house I would try to find assets highly correlated to the housing market to save in. Probably can find correlation indexes on-line. Not sure what they are but maybe home builders, apartment REITs, timber REITs, copper.
If you cannot afford a house and put your money in REITs then you are financing your competitors.
Home builders could probably help the situation.
At the same time we need younger generations to have more kids but instead they’re having fewer….the cost of living certainly has to be a big part of that.
But you’ve nailed it with regard to current generation in power stealing from the future…
Corporate American and the FED have turned families into luxuries. Now we are left with a choice between using immigration to bring in the next generation of suckers, or just allowing the old to die off (demographic collapse leads to collapse in social security and healthcare leading to a great die-off of seniors who can’t support themselves).
Probably the only Great Reset that will happen.
You can still buy a pretty good Townhouse on the wrong side of the tracks in the Swamp. Saw one yesterday that had more sq footage than my own house. The only problem, you have to endure a crime wave that is sweeping the city in these neighborhoods, open drug dealing, prostitution including an occasional “Lewinski” taking place right on the side walks on busy streets, litter and broken liquor bottles all over the place, graffiti etc.
Couldn’t have said it better.
On the most fundamental level I’m unable to see how monetary policy in of itself is really at issue at all. Because the fundamental currency affecting us all is massive deception so deeply ingrained within our education system itself, thereby rendering all of our values to be warped, subsequently influencing our behaviour. Going digital with any currency would only mean more smokescreen on top smokescreen, you would still need to have an act of “fiat” to turn into legal tender and it would still need to back by lead (the swift flying type) as the enforcer making it widely acceptable aka making you an offer that you can’t refuse.
The Fed’s policy borders on criminal because it disregards legal mandates and violates every societal value that led to US prosperity in the past. Hard work and reward, fairness, and community have been replaced with speculation, counter-productivity, and an irresponsible dog-eat-dog/YOLO financial mentality that demands recurring bailouts. The Fed’s policy is now a parasitic element of society.
The country badly needs an asset price drop to reward prudent investors/employers and wipe out the speculators/government-dependents on Wall Street and elsewhere that waste society’s resources for personal gain.
Good one Bobber.
well said. there’s no better example for a waste of resources than burning tons of energy to “mine” crypto.
To be fair, how much energy goes into mining and minting pennies?
The way I understand how our financial system works is that new money is created via new loans.
So for the system to continue to expand it either needs more new loans than are paid off.. OR it needs loans for more money, i.e. as in higher and higher priced houses.
So what the FED is doing is providing the new money that the government and corporations need to borrow by not only low interest rates thru QE but by keeping Fanny, Freddy etc flooded with money.
The consequences are inflation including much higher priced houses.
Their dilemma is that if this slows down enough to actually stop or even slow the inflationary pressure, the liquidity will dry up throughout the entire system and many bad things will happen..
On the other hand, if they don’t, inflation will destroy demand and then loans dry up and there won’t be new money to fund not only the Treasury sales but also bonds for stock buybacks.
Between the Devil and the Deep Blue!
Lets not forget as the price of that house goes up so dont your taxes, insurance. So this is a win win for the government. Local goverments get to collect more tax revenue as your house goes up in value. Insurance companies get to rake in more profit.
And since when is a house become an investement. If you sell your house today for a profit(more money than you paid for it) you still need a place to live. So how did you make a profit? Are you gonna live in a tent, or your car? No your gonna have to buy a new house to live in so you didnt make a profit at all. You most likely lost money between the 2 transactions in mortgage origination fees, closing cost and real estate commisions.
So unless your in it for investment purposes and are flipping houses for profit you are no better off than before. House’s should not be used as a investment tool. They should be used what they were designed for. A place to call home and live in.
“Those are my principles, and if you don’t like them… well, I have others.” ~ Groucho Marx
Buying MBS into the teeth of insane housing inflation is either an act of pure malice against the middle class or pure corruption to enrich the billionaires. And I can’t figure out which one is in Powell’s heart. All I know is we’re all getting run through with a sword and nobody is talking about it.
read my comment above
The FED has no choice to keep liquidity in the system.. They are truly painted into a corner with non drying paint.. No matter what they do it will mess up the floor and leave really ugly tracks.
Apparently, an outside actor is urgently needed.
Sounds like they really focked everything up with no solution, by your account. When somebody fails that badly, they get fired at best. At worst, they go to prison. These guys should be on death row for economic terrorism.
They paint themselves into a corner…..and call for more paint.
Never do these central bankers see the ramifications of their actions or consider exiting.
For every action, there is an equal and opposite reaction. The elites don’t see the “reaction” in the grocery, rental, lumber yards, gas pumps…etc.
That’s whats called a ponzi scheme. Fiat financial system always needs a infux of new funds to exist. And its a pyramid system with money flowing to the top of the pyramid. But what happens to all ponzi schemes?
And do you think that some of this rent inflation is due to landlords making up for lost revenues from rent forbearance?
I remember reading last summer that over the prior 12 months Congress had allocated $53B for rent assistance but by last summer only about 10% of the monies had been doled out. And since then, I haven’t heard a peep about how it all ended.
If you got screwed by Uncle Sam as a landlord, it’s not against the law to rents over the near-term to make up that loss. Just sayin.
Inflated property prices lead to higher property tax receipts.
The Fed never had any business buying mortgages or corporate bonds in the first place. That’s not monetary policy, it’s picking and choosing winners. Of course continuing to buy mortgages long after the housing market took flight compounded the misadventure manifold.
IF….IF the Fed had been kept within the lines, inside the guard rails, held to their mandates and restricted to federally backed paper dealings, expanding the money supply in increments only dictated by an expanding GDP, etc….
But who is there to make certain the Fed plays by the rules? Congress, who benefits from the cheap origination of money for their Trillion dollars spending (vote buying ) bills? In a system of “checks and balances” there is no “check” on the Fed.
And now “inclusive employment”, climate change and green energy, social justice, etc. is all within the purview of the “new” Fed.
Agency creep in an independent Fed…maybe too independent of oversight.
As Powell said, “some people are prone to suffer more.” There will always be winners and losers in the game of life. If you’re on the losing side of the Fed’s policies, you need to figure out a winning strategy. Those with desirable skills and entrepreneurial spirit have done exceptionally well in this environment.
Thus they gain more power by forcing others to play their game…buy what they own.
Free markets for free men?
” desirable skills and entrepreneurial spirit”
Those who bet the Fed would NOT stand to their post, do their duties to fight inflation were the big winners. Historically, the Fed would have raised rates to meet the inflation rate…as they did for 70 years prior to 2009. Knowing that they would NOT was the key.
For where would the markets be if Fed Funds were say 4%?
So the borrowing problem was so big they couldnt raise rates? This is the college loan argument….” I didnt know I was borrowing so much. Do you expect me to do what I promised…..pay it off?”
wtf are you blabbering about? those with real skills and entrepreneurial spirit have found themselves crushed by businesses that are handed free money to play with. how well does the entrepreneurial clothing store owner do when the big public companies can issue stock, 2% bonds, and other capital raises to buy them out or shove down their margins?
unless you consider trading bitcoin and leveraged stonk positions to be “entrepreneurial.”
Come on Max Power, that’s unfair. They ARE COMPLETELY DATA DEPENDENT!!!!
*(dependent to the data they see in their personal portfolios)
Citizens must identify the real enemy, the real culprit of this inflation madness. And march against them !!!
Jerome Powell, Fed guys & wall street friends
Start with your END THE FED bumper sticker
You need to add Congress in there for their reckless spending
Let me offer you a guarantee:
if you had a presidential candidate who pledged to reduce house prices by 50%, he’d lose the boomer vote by a landslide.
Is it really just the Fed who are the problem?
Not to worry. With millions of Boomers dying off every year, and homeownership at its lowest levels in decades, that ship is sailing away. Soon enough, a campaign to restore housing affordability would generate more supporters than some old greedhead expecting young people to fun his life by buying his overpriced shitbox.
And yet millennials have had a significant impact on the housing market. They rallied around and got elected President Obama who, when faced with the housing crises 14 years ago caved in to Wall Street and, instead of renegotiating principal balances on foreclosed properties just allowed banks to bundle and sell to big investment firms. Then the disrupters (millennials) did the AirBNB thing which opened the housing market to “investment” by every manner of “professional” taking housing off the market to families. I can’t tell you how many successful Millennials I know who have invested in second, even 3rd homes they now rent through AirBnB. Not to mention all the “Disruptive” innovations in all manner of basic fundamental services. Like Doordash & Uber. This is your generation’s contribution to equality for all?
Take a look in the mirror man. Do you really think your generation is wholesome and ready to share the wealth equally among the “people”.
Watch out for what you ask for
There are serious unintended consequences.
However, how else could the genius (like Nikola Tesla) of our time (Elon Mask), become the richest man in the world ($200 Billion), in under one year. How?
Where I live in north Idaho, the affordable rental is now a used RV trailer, parked either in a trailer court or in some family member’s driveway. Invariably with a blue plastic tarp stretched over the top.
Idaho is about to be in a long term secular decline. The amount of Californians moving in with money from selling overpriced homes is driving the wrong kind of people out of the state, which is the the middle class.
I know people that live there that couldn’t buy the house they live in right now if it were priced at current market values. Houses appreciating at values faster than the median household wage, for years on end, is totally unsustainable.
In many cities in Idaho in the very near future there will be no teachers, nurses, police, or firefighters as they will all have been priced out, and all that will be left will be baby boomers demanding services. Services which will only exist at the most exorbitant prices.
Just wait until your local RE appraise and tax denizens wake up from the Californians lamenting the lack of woke services where you live.
Doesn’t matter if you own your house outright, they can kill you in taxes, some places in Illinois and NJ are over 2.0%/yr on those high current market values
I advise you to get to your local town/county administration first and get some grandfathering, long term resident, old age, veteran, etc tax reduction/forgiveness policies in place.
Californians get to enjoy that 2% per year bump courtesy of Proposition 13. Well, no more than 2%, so be grateful for small favors.
Speaking as someone who came from a middle of the road bipartisan area and swing state to north Idaho, most of the Californians that have moved to north Idaho are right of center to far right extremists.
And most of them are house poor and barely swinging it if they’ve moved here in the past year or two.
The overwhelming vast majority of the Californians here are rolling around in monster trucks, have short tempers, have 3% stickers and thin blue line stickers plastered allover their decked out f150s and Tacoma’s.
Boise is a lot more liberal but Idaho has turned into the fleeing destination of right winger antigovt types like it was in the 80-90s. With a lot less racism. The white nationalists are mostly in Montana and Oregon now from my travels.
I doubt Idaho will go blue anytime soon. Class entropy is a very real risk though and it already exists in a lot of areas up here. Especially around the national parks in Montana and Wyoming. I get to see all the scenic tourist spots and small towns when winter hits and the wind chill is -30f. It’s depressing. In the summertime, hundreds of working twenty somethings in every decent sized town keeping the show going for tourists.
@Trucker guy – you are spot on. My family lives in Eastern Idaho and the people moving there are NOT the liberal dems. The vast majority of them are, bare-minimum, strong conservatives. But a frightening number are hard-core right wingers.
The country, particularly in the west, is beginning to separate into tribes.
here it comes, that’s a good thing. the sooner we separate, the easier it is to dissolve the united states. staying together for the children hasn’t worked. it’s time to go our separate ways.
You’re spot on. And the demographics are showing this. The county where I live has gotten older — the median age has increased to around 50 YO. There are more people 65 and older than 18 and under, and these newcomers do not like to pass the school levies. I guess they figure that they’ve raised their kids and they don’t want the expense of paying for the education of the local kids.
Worse, the county is also getting ‘woke.’ These new folks can’t stand where they moved from, but they sure want to change for the ‘better’ where they now live.
There are people all over America that couldn’t buy the house they live in. Welcome to the FED supported rentier society.
But corporate real estate entities can afford it. “Buy up anything that is selling for below replacement cost”…is their mantra.
And it has been said 1/3 of all corporate residential real estate purchases are foreign.
Couple this with the same people that cant afford their house not being able to SAVE MONEY! 7% inflation and zero interest rates…NEVER EVER HAPPENED before….and both are a result of Fed policy. Punishing savers, that is criminal….and theft of the highest degree.
The PE and other big institutions get next to free money thru cheap $ from the big banks to buy residential properties to rent back to you.. The Financial Cartels have taken over. The FED is their enabler..
Yes, it’s the Big Bad Fed. But it’s also banks worldwide. By design. Based on the ultimate desires of “benevolent” Elites, who do think and act like a true Class above all of us.
Look at what they were predicting for 2030 over at the World Economic Forum’s Facebook page just a few short years ago, before Covid “suddenly, organically” sped everything up:
“You’ll own nothing…and you’ll be happy. Whatever you want, you’ll RENT”. (Who is “you” and from whom will “you” rent everything in your aspirationally-challenged life? Conveniently left unsaid…)
Also, these same Elites gleefully and proudly prognosticate for 2030 (now just 8 short years away): “The US will NOT be the leading super power – a handful of countries will Dominate” (dominate whom? “You”? The FED? Should “we” rejoice that all our remaining powers are being taken from our hands?)
Oh, and don’t forget: these same Elites demand that “You WILL eat much less meat”, and since “a Billion people will be ‘displaced’ by ‘climate change’, (by 2030, mind you, and to which destination, you’re free to guess), you’ll “have to do a better job at welcoming and integrating refugees” (into ‘your’ rapidly declining, cost-spiraling, ownership-vanishing countries).
Incidentally, with of course no connection to the above desires, the WEF Elites also proudly predict that “Western values will HAVE BEEN tested to the Breaking Point” (notice it’s not “will be”; it’s over, by 2030, a done deal, we will have been tested).
Buckle up, Buckeroos. You ain’t seen nothing yet. There’s a LOT more “nothing” coming your way soon, should the Elites achieve their designs…
This reminds me of a news story from the Washington DC area now some 20 years ago. In a neighboring hi-brow residential area, the county decided to zone some affordable town house unit, specifically for firefighters, teachers, etc. who could not afford to live in the area. The locals were aghast at having this low-life scum in their neighborhood.
The target price for these “affordable” town houses was $400,000…..
Collar counties of Washington DC wealthiest in the nation.
So the antifederalists were correct again. Send money to a central location, from the States, and a chunk of it will “disappear”, eaten by the bureaucracy.
I’m a foreigner here, but based on what I’m reading here on this board I seem to to be having a little trouble reconciling the various commentaries with the free market theory that I was thaught growing up. Am I thoroughly brainwashed?
“Free market theory?” Hahahahaha with the Fed running the show and printing $4.8 trillion in less than two years in order to totally distort the markets and make sure that there are NO free markets, such as a free market to set the cost of capital (interest), stock prices, bond prices, house prices etc??? You made my day. Free Market, what a joke, hahahaha
I just moved into Idaho a few months ago (not from California), and I really hope you’re wrong (but you probably aren’t).
Thankfully I’m in a part of the state that doesn’t seem to be attracting as much of them as places like Boise or Sun Valley.
Don’t worry, they can set up public services for Spanish speakers which will attract plenty of low wage workers that will take those jobs and gratefully live eight to a room, still better than back home.
T22-plus ca change, plus ca meme chose…
may we all find a better day.
I would say American ‘s are kind of spoiled too. I lived in four different places in the last 15 years and averaged paying right around $475 per month. None were in dangerous neighbors and all had good neighbors. Sure they were not HGTV quality, but but if you are not trying to impress someone who cares.
I kind of raised my own rent this year to $750 because a young guy bought the house I am living in and his cost to carry it not counting maintenance is $710 and I didn’t want to move out.
Powell, “Well, statistics show inflation has disproportionate impacts on various and sundry socio-economic groups.”
He also said the government doesnt have a problem borrowing at these low rates.
How can the next question not be..
“But the Fed now has 25% of all marketable Treasuries and 24% of all residential mortgage securities. Isnt THAT why the borrowing is easy….YOU’RE the LENDER? The Fed has its foot on the scale.”
Mr. Powell….did you hear the question?
Randy Newman, 1974, “Mr. President” Lyrics:
I know it may sound funny
But people ev’ry where are runnin’ out of money
We just can’t make it by ourself
It is cold and the wind is blowing
We need something to keep us going
Mr. President, have pity on the working man
(Song was also featured in Forrest Gump – movie & soundtrack – in the 1990s…)
I’m not a U.S. denizen, so I just can’t get my head around it – 25,3% increase for… Anchorage?.. Why?
Working from home?…love the scenery and weather (maybe). I’ve been to Anchorage many times when I was in the oil business. It’s still the “wild west” in that state. kind of gets you away from the madness in the lower 48.
Anchorage is a great place. The best to two worlds, the comfortable ‘civilized’ and at the doorstep of the wilderness. A great place for the person who loves hunting, fishing, hiking, etc., but wants their lattes too.
And you can almost grow a decent garden there too!
Sounds great but the 25,3% raise is still a rip-off.
Oh wait, the whole market is, I get it now :D
Work from home should have zero affect on house prices in a place like Alaska. It’s not like they added a bunch of population. The problem is that people were buying a 2nd home and not selling the first. Now we have a bunch of empty houses everywhere.
Still hoping for an edit button one day.
Glad to see you know the difference DC!
Goes along with the relevance of many of your comments on the wolf’s wonder site…
In other news, in spite of my eternal optimism, at this point, having just gotten to the ”end game” of Lawrence James’ great book, ”The Rise and Fall of the British Empire” which I recommend to see how similar that situation was to today, it seems clear enough that RU and CH are preparing for a two pronged, possibly more, attack(s).
While it will not be the end of the USA hegemony over waaayyyyy too much global real estate, etc., it will certainly be more nails in the coffin…
BEE PREPARED for it is all I can suggest…
”IT” being EMP, etc., on our largely NOT prepared electrical grid,,, especially considering that almost all of the computer controls of our grid come from,,, guess where!!!
money printing and interest rate suppression …..
along with banksterism and government home loan programs
our current officials and their masters love wage, debt and rent slavery
it keeps their bread buttered and servants working for them
Government “affordable housing programs” have contributed mightily to lack of housing affordability. It enables people who otherwise can’t quality to buy at all and many more to pay more.
The only “natural buyers” for 30YR mortgage paper are pension funds and insurance companies with matching long-term liabilities.
No one else would lend their own money to what are actually predominantly marginal borrowers on current terms ( low down payments, maturity and interest rates) at their own risk, except to speculate on interest rate changes.
Less familiar with rental subsidies but don’t see why it is any different.
Both housing subsidies, rent controls, price controls and student loan subsidies seem at first to “increase affordability”, but that overlooks the long term side effects (aka “unintended consequences”). In the long term the meddling just rewards inefficiency and creates higher prices for all… sadly it also creates business for middlemen who get some skim and then hire lobbyists to keep the grift going…
What’s interesting is when you realize that the Fed’s true business is implementing price controls, not on stuff, but on credit itself! The interest rate is literally the price of credit.
Price Controls Don’t Work – And Fed Credit Is No Exception.
Rent strikes will solve the problem along with rent control and an $18 minimum wage. Oh yeah, nationalize the banks and cut the “ Defense “ budget by 75% and dedicate the funds to education and infrastructure after confiscating all personal assets over $10 million. Can’t live on $10 million ? Things are tough all over. I almost forgot, all earned and passive income subject to Social Security taxes. Can’t leave out Socialized Medicine. No more oiling the machinery of capitalism with the blood of the worker, because there will be no more capitalism, only justice. Some call it Socialism.There, fixed it for you. You’re welcome.
Please clarify for me what a rent strike looks like. Renters start taking up in parks and wilderness areas? I believe the label is the problem. Rent strike gives a delusion of agency. Let’s call it what it is, homelessness.
no, a rent strike is just renters refusing to pay their rent. let the courts be overloaded with eviction proceedings. that’s what’s going to happen if corporate investors keep buying up houses.
I plan to negotiate if I see a 17% asking increase on my next lease, but I’m saving for a down paynent on SOME kind of real estate.
That’s how little Americans push back. This guy doesn’t know what a rent strike is.
No European would ever be confused by that term.
You’ve let the rich walk all over you.
If society makes being a landlord so miserable that no one wants to do it [after all, no one is obligated to provide rental housing] then there won’t be anymore rental housing.
I am converting my apartments into condos so I can bail out at the right time, which will be when I can’t take the misery of being a landlord anymore. I can sell then one by one to first time buyers [good move for them] but then there is that much less stock for future renters. No idea where they will live – and we are talking college housing here.
Nothing has been studied for so long and so throughly in economics as rent control and 99+% of economists think it is a terrible idea.
This for EL:
Agree, like totally!!!
Berzerkeley, CA would be one excellent example of rent control doing just exactly the opposite of what was intended…
”The Road to Hell is Paved with Good Intentions.” is really the relevant concept whenever the ”’do gooders” get their way, as can be seen in every single instance where they start taking our freedoms away,,, certainly prevalent in many spheres of life in USA these days compared with my young days in the 1940-50s.
if we make being a landlord miserable, you’re right that no one would want to do it. that would drive the prices down such that people wouldn’t need to rent in the first place.
in any event, i’m not advocating making life miserable for landlords. i am just noting that if you end up with a society where corporate investors buy up all of the housing stock and turn entire towns and cities into rental properties, you’re not going to like what the renter voters put into place politically.
Toronto Police are paid by the Mayor of Toronto to beat up the homeless who protest in parks.
Toronto has had rent control for years. Several years ago, it was not unusual to see “No vacancy” signs in front of what were once modest three story apartment blocks that at one time were affordable for middle class wage earners. Rent control in a city is a strong disincentive for real estate developers to NOT build rental housing. It is also a strong incentive for current occupants with favorable rents to NOT move.
A buyers strike is coming….
All the rest of that utopian pipe dream is just that….
Why don’t you and your friends get together and build you a place to live in your spare time. You will find out why the rent is so high.
The rent is so high because landlords can get it. Part of it is because of government programs that subsidize rents. Also FED policies that give cheap money to property and apartment accumulators, government tax policies etc.
If the defense budget was eliminated entirely, it wouldn’t come close to paying for the social decay already existing in this country.
The rest of your fantasy wish list, maybe at the bottom of the upcoming greater depression when living standards have already collapsed and asset values fall over 90%.
It’s not going to happen anywhere near a market peak.
Paraphrasing Robert Frost:
“The Bidenpression will be long, dark and deep.”
Can/should the US defense budget be reduced? Sure. But deep, fast cuts could have severe consequences. Over $160 billion pays personnel, so cuts there mean firing troops, and over $275 billion go to operations and support, including healthcare, training, etc., so how much of that can be cut? And how much weapons research should we cut? Pulling back from our ‘World’s Policeman’ role would improve our standing in much of the world, but not everyone is going to instantly like us, and I’m not thrilled with China and Russia having weapons we don’t (eg, deployed hypersonic missles).
Let’s start with closing the 800 U.S. military bases worldwide.
And your last sentence, we certainly don’t need nor can we afford yet another arms race.
There is another part of the whole DoD budget that rarely gets mentioned. I worked for major DoD contractors for ~30 years. The defense companies can afford to actually hire most of the “best and brightest” because they have unlimited budget. I worked with a huge number of seriously brilliant engineers and scientists – that whole “rocket science” thing. When you consider the “guns vs butter” equation, many of the truly gifted and creative folks were scooped up by the contractors because they could pay far more in wages and perks than anyone in competitive private industry. It’s been a gigantic misallocation of resources that doesn’t get noticed. This is all gonna get real ugly when it starts to unravel…
The smartest folks from the math and computer science departments that I went to school with ended up on Wall Street writing algorithms to make wealthy people even wealthier. Talk about a waste of human talent.
Have you ever visited former Soviet Union, perhaps present day China? Venezuela perhaps? Careful what you ask for, you may get it. Oiling the machine of Socialism, with your blood, unless you’re one of the elite in that system, will leave you with begging for scrapes. Perhaps what you mean to say, is a world with moral and ethical standards applied equally to all.
Then socialism, capitalism will work. There, fixed it for you.
We all need to look inward first and see our own personal prejudices before we blame everyone else for our problems.
I’ve spent the least seven years retired in China. I can tell by your remarks that you have never spent any time there. Where do you get your “information”?. I can tell you that capitalism is alive and well in China, and not the vulture type that is prevalent in America. It is easier to start a company and get rich in China than America. The middle class is growing steadily, year after year. Nobody needs charts or graphs to see that their life is better than last year and ten years ago. Nothing makes the citizenry more loyal than this.
I have lived in China for years, in Hangzhou and in Suzhou. Don’t live there now, wouldn’t if you paid me to. The average air quality in Suzhou even 10 years ago was, according to a scientist pal of mine working in Zhejiang U, the carcinogenic equivalent of smoking a pack of Chinese cigarettes a day…how’s the “progress” going in this area of the Chinese Dream (to say nothing of the water toxicity)?
If you don’t see any “vultures” in your so-called “Capitalist” Chinese system, you need to seriously think about buying some less rose-coloured glasses. Maybe you’ve had too many red communist flags jingoistically waving in your face lately?
Wasn’t it amazing how the government just completely wiped out an entire thriving segment of the economy in the education sector at the mere whim of an unelected autocrat? I also think they’re doing a “wonderful” job handling government debt, to say nothing of the “thriving” property market…er…
I remember your Dear Premier Li Kecheng stating in 2020 at the closing of the second session of the CPPCC that “there are still more than 600,000,000 people who earn less than USD 157 per month in China”. That’s almost half the People in your “People’s” Republic, right, earning less than 2K a YEAR? Doing so well!
Keep up the China Great propaganda, because we all know that neither you nor the corrupt Chinese government can keep up all them “Tofu Dreg” bridges and buildings for much longer, can you? They keep falling down, day after day, week after week…I saw some collapse with my own eyes, in one of the “richest” cities of your “get rich” country.
“Loyal” citizens…lol. You make it sound like they even have a choice! Have another Social Credit point for your PPP (Pro-Peking Propaganda), you certainly deserve it!
I’m a Westerner living in China for 21 years.
It is way, way easier to get rich here than Canada. The middle class is huge and doing very well. The blend of socialism and capitalism works well.
If you only watch MSNBC or the like, you’d think it’s N. Korea. But the system here is what America wanted for itself, but never got. Capitalism with no socialism ends up with a few guys having all the loot, and everyone else struggling. Sound familiar?
Oh, and people love the system here. Come and ask. And I lived all over the world, and this is the only government that actually serves the people and not just a bunch of huge corporations. In reality, the government cracks down on monopolies to help foster smaller businesses. That’s a good thing in my view.
“the government cracks down on monopolies to help foster smaller businesses.”
Hahahaha, the Chinese government and lower-level governments OWN many of the giants, including the four largest banks in the world, and numerous other state-owned giants.
But yes, authorities do crack down on giants that they don’t own when they begin to threaten the government’s power.
The Social Credit Score Surveillance Nightmare Orwellian State:
Man jaywalks. Before he gets to opposite side of street, facial recognition linked to cameras, subtracts the fine from his bank account.
“How China uses facial recognition to control human behavior
When facial recognition is everywhere, anything you do is fair game for public shaming and punishment.” CNET
The USA Federal Government operated banks of a sort. It was done thru the U.S. Post Office. They used to sell savings bonds, money orders, and may have had other services that I did not use (deposits were limited to $500).
When it was discontinued back around 1966, the business was taken over by the people who evolved into the modern”Pay
“Rent Strike” may sound politically correct and legitimate, but the real word is “Squatting” – a person unlawfully occupying a building or land (that doesn’t belong to them). “Trespassing” seems to fit the activity as well.
Based on “Rent Strike”, I suppose all the hoodlums in California who stormed retail establishments and stole/looted goods, then ran outside to escape into waiting accomplices’ vehicles were “RETAIL STRIKERS?”
Try going into your local food market or Home Depot, loading up your cart with food and merchandise just walking out the door without paying. See how far you get. “FOOD STRIKE??”
It’s all called anarchy and thievery. I’m shocked comments here support such criminal activity!!!
As soon as we start throwing bankers in jail for robbing the American people for millions, maybe I’ll consider getting upset about someone stealing food to live.
Boo hoo, someone doesn’t get to throw their tenants out into the streets after they were unable to afford the latest rent increase! Landlords are parasites who provide housing in the same way scalpers provide concert tickets.
Let me help you understand the other side.I spent the last 15 years rehabbing derelict housing. I provided steady work for 3 guys. A framer, a plumber , a laborer, and me. I scraped me 3 guys off the addiction wagon. All were rough, had spent intervals sleeping in the woods behind Walmart, and were well acquainted with hunger. IN addition to their wages, I spent about 100K on each house to provide a well insulated, low energy cost rental. I have 7 rentals and no pension. Have I earned an income stream?
So not paying your rent is criminal activity? I think you’re living in the wrong century.
Are u nuts no tax revenue at 10 million ,oh they don’t pay taxes ,as Warren said and I quote my secretary pays more taxes than me
Flea wrote: “Are u nuts no tax revenue at 10 million ,oh they don’t pay taxes ,as Warren said and I quote my secretary pays more taxes than me”
LOL. A FT burger flipper pays more in taxes (Social
Security) than the former “Billionaire” resident of the White House….and he said that made him “smart”.
Slightly off topic in Canada rents have doubled in two-thirds of Canada in the last 5 years and wages have only gone up 10 percent in those 5 years. Rents are not included in the CPI or inflation rate in Canada.
A minimum wage worker earns C$2400 before taxes, working 40 hours a week, but rent for a 1-bedroom apartment is C$1900 and going higher.
But do people actually work for minimum wage? Where I live the minimum wage is less than $8 an hour. But the actual minimum wage being paid is about $13 or more. No one here would accept a job that only paid the federal minimum, and employers are competing for workers by paying much more.
One of my daughters graduated (mEng) and started a job for the federal government in Ottawa last year. $60K after deductions is $3180/m She can make her rent, food, utilities and gasoline but there’s not enough left to own a car.
Minimum wage workers should not expect to live in their own dwelling in a major city.
I live in the ATL area and to my knowledge, they couldn’t do it when I was in high school and college in the 80’s even when housing was much cheaper. Certainly not anything remotely newer meeting more recent usual expectations for acceptability.
I made from $3.60 to $9.29 per hour working at Kroger, usually 30 to 40 hours a week. Minimum wage was $3.35 to $4.00. Toward the end of my tenure there, I could have done it but not earlier.
Most of my co-workers were young like me but if not living at home, usually shared housing in one form or another.
In depression my grand mother had 15 family members in one house ,on 80 acres
OK, now go back to the drawing board and see when the federal minimum wage was raised most recently and how much inflation we’ve had since then. Then compare what the minimum wage bought when you worked at Kroger, and what it buys today. The minimum wage has been purposefully gutted via inflation and lack of inflation adjustments by Congress.
Where does your Mr. Trudeau expect to settle all of the new immigrants that he want to bring to Canada in 2022? In 2021, immigration to Canada was at an all time high and was only the second time in history that immigration to Canada topped 400,000. The last time was in 1913, when the major urban areas had far fewer people and new housing construction was much easier to carry out.
Point made, and I appreciate it. But with due respect, I think there are deeper, wider problems of which the Fed policies are merely the most visible. I think the rise of network effects (winner take all, growing disparity, radically different paths for various people) have countless expressions across the planet. Individuals acting in their own best interests (rather, the failure of this) presents a collective action problem that is not being solved; to the contrary. I don’t think it is restricted to any particular political system or regime either, though again, one can point to obvious culprits such as the rising relative returns to capital, versus human labor. It is complex and many-sided but I think the most prominent aspect is the decline of old networks (thick, embedded, social, local) and their replacement by disembodied flows of capital and other resources across modern tech networks, at 30,000 feet so to speak. Automatically massive numbers of people are excluded/marginalized. One version of this critique emerged with Marx, though he was wrong about countless things.
No. The Fed policy IS the problem, because it both subverts market prices and ENABLES a myriad of other government interventions. Without the money printing, bureaucrats would have only the power to tax and borrow, which has a quite limited political half life. Again, without the Fed sticking its nose in, all the other issues you mention could be solved by a competitive marketplace.
“solved by a competitive marketplace”…..
well we almost had one in late 2018 where the Fed actually did their job, had Fed Funds equal to inflation (2%). But the “competitive marketplace” couldnt handle it……..and Powell was jawboned by Trump to change course.
What’s the Jack Nickelson line….”You can’t handle the truth”……well, the market apparently cant. 2% Fed Funds was a shocker in ’18. Now I would suspect 1% would have a similar impact. The Threshold drops, the market is more and more fragile….and is defended more and more.
You bring up taxation….
Inflation is a tax. The Fed is laying this tax on the People. They have no right to promote any taxation inflation on us. Taxation is reserved to Congress who must answer to the voters. We have no representation on the Fed. Thus we have taxation without representation. Ring a bell?
Where is Volcker when we need him ???
Or is it waaaay to late for that ???
When Volcker bit the bullet the US debt was around one trillion. Now 30T. So to answer you: maybe.
The FED and their masters, the bankster/wall street/private equity class, has little interest in free markets.
Debt service is the name of the game. Fed is suppressing rates to keep existing debts serviceable. Otherwise a lot of debt defaults are going to occur. Future is a little bleak. Savers going to pay through negative real rates. We are all going to pay through inflation. Investors going to pay with lower asset returns. It’s what happens when you push the debt system too far.
Don’t bet on a specific outcome. Stay diversified if old including some precious metals. Keep improving your employment skills if young. Keep swimming where tide is going in or out.
The cost of servicing “new” debt and any variable debt out there will increase. But the coupons stay the same on most of it.
Future is more than little bleak for a noticeable (though maybe not majority) of the population.
Living standards for most Americans are going to decline over the next 20 years. It’s a virtual slam dunk. Measuring living standards by median household income and net worth, it’s taken a 5X increase in the national debt and a 14X increase in the FRB’s balance sheet to keep both flat since 2000.
What’s going to happen when current policy no longer “works”?
I think we were possibly slightly on an upward slope, but nearly flat on standard of living before GFC. We have taken a one two punch with GFC and the Pandemic.
Poor government oversight on financial markets and poor over sight on lab research it appears.
Will raising interest rates un-ring this bell? It is not symmetrical in the sense of physics. Time arrow going forward says, it doesn’t just rewind.
No. The thieves already digitized new money and put it into the system where that money is going to stay. Though that new money will work it’s way to the top, it has already reduced the value of your dollars. That is the way a FED supported rentier society works.
Too bad the Fed subsidizing the housing market isn’t working, the term affordable housing is a joke. There is rent control in California? Higher rents mean people stack up, 8 x 2bdrm, not sure if landlords can control the number of people in their units, or they want too. US has a lot of FEMA trailers, time to break them out. In SF is there is a problem finding service workers?
It is working perfectly from the vantage of the FED and their masters.
Landlords can control who is authorized to stay in an apartment. At one of my old places, they needed to be notified if anyone planned to stay for more than a week or two. Failure to do so (and getting caught) was grounds for some action, maybe eviction. Not a policy I ever tried to test.
We had FEMA trailers after Katrina, gov subcontractors do the setup in the front yard of your flooded house or office, wheelchair-accessible ramp stick-built on site, other subs run above-ground sewage line, electric temp pole,water stub up if needed. As ugly and depressing as you might imagine. By agreement with the trailer manufacturers, none were to be sold to end users, all supposed to be destroyed after the emergency passed. The propane these thousands of trailers needed that winter swamped the local gas companies. Katrina cottages took longer to get delivered, but lots of them are still lived in today, and they’re better quality than any trailer, and they can sit on pilings above the surge. They can be attractive. The trailer idea was the fastest available housing, people were sleeping on their lawns. It worked as a stopgap measure, but I remember that FEMA had to flatbed some of them out of town after the axles collapsed leaving the driveways. Built really quick does that sometimes. I guess I just don’t want to have to think of anyone having to live long-term in one and associate them with natural disasters.
In San Diego .. a 2 bedroom apartment cost $2500 per month give or take.
2 families with no kids can easily live in it.
Basically 4 adults per 2 bedroom.
This is what is happening.
A 2 car garage sfr has 6 cars or so with streets full of cars parked at night.
For almost a year, I have been complaining to elected officials about the Fed’s QE policies. These officials either don’t care, perhaps because they are profiting, or they are too eager to believe every crackpot economic theory espoused by a jackass with a Ph.D. in economics. Along those latter lines, Congress enacted three stimulus bills, one of which permitted people to withdraw $100,000 from their retirement account without paying the usual 10 percent penalty. Where I live, I didn’t notice crazy house-price inflation or general price inflation until after the second and third stimulus bills were enacted, so I think much of the blame for these problems belongs with Congress’ reckless spending spree. I would love for Wolf to explore how much of that stimulus spending (including cancelable PPP loans) was effectively stolen and invested in various markets. That’s probably too big a task for one man to handle, but I’d still like to know.
I have subs that I hire that dipped into the payroll relief and I know for a fact they didn’t need too.
Most folks can’t turn down free money…. Human nature or greed? Either way the feds know this…
I know quite a few doctors and lawyers who used their 100 to 500K PPP loans that they do not have to pay back to buy real estate as an investment. Quite a few Mercedes too but that depreciates. Oh and a few boats…..again a lot of maintenance and depreciation. My dentist got a boat. He only shut down for one week during the height of Covid. He pocketed 100K tax free. Oh and my son’s girlfriend. A loser who likes to live well and not work….between unemployment and the federal addition she got 700 per week for over a year. Might still be getting it. They are voting for democrats forever although the Repubs are no better. They are buying everything in sight. This is really MCGA…….making china great again. Supply chain…….in English that means Made in China by Chinese workers paid with US tax dollars.
I have often thought it would be fun to buy property next to Fed building and stock a finger in their eye.
Maybe on one side a nice gold shop with a sign in window saying trade fiat for real money here.
Maybe on the other side a history museum of the history of failed fiats and failed central banks.
Saw a story on the PPP fraud….
The numbers were $100 billion of which roughly $2 billion recovered. Much went out of the country.
Spilling money … especially cheap money….is the sport of Washington DC.
Powell is a private equity guy. The FED is there to advance bankers/wall street and protect their equity. Big money loves a monopolist and rentier society.
It’s not complicated. Increased welfare, increased minimum wage, stimulus, bailouts, tax cuts, ultimately go to the rentier class. It’s called Trickle Up. Reagan had it backwards.
The FED is a major player in the system to capture productive servants for the monied class and assure a basic framework of society, including law with the judicial system, police and the armed forces to protect them. The FED and their banker/wall street/private equity constituency look to create wage slaves and debt servitude. nothing better than a steady paying renter, whether that renter is renting money or shelter or both, that renter is typically beholding to to an owner.
The Fed’s ignoring of the “promote moderate long term interest rates’ mandate is at the heart of their malfeasance, IMO.
This was the third mandate in the Federal Reserve Reform Act of 1977.
You can not find mention of this on the Fed web site or in their recent publications. They have buried it.
IF the Fed had been held to this mandate, the yield curve would not have flattened, there would have been a balance between lender and borrower, the mortgage rates would not be sharply under inflation, and the irresponsible creation of long term debt deterred by the higher costs.
But the Fed drilled the idea of a “dual mandate” into all discussions, omitting the “promote moderate (not extreme) long term interest rates”.
Now we have the stealing of future wealth brought forward to push up the housing and stock markets.
IF the younger generations knew that their future was being emptied out (21 Trillion since 2009) to have that same money be used to bid housing and stocks up and away from their grasp, I suspect they might be pissed.
Most of ’em won’t be upset until their “crypto portfolio” disintegrates.
@ historicus –
you are right, but mandates and morals are for little people ……
looters, thieves and rentiers can’t be bothered with such trifle
The “twist” worked as follows:
Fed bought long-term Treasury bills and then sold an equal dollar amount of short-term Treasurys into the market. This lowered interest rate on long-term. But selling equal value of short-term, it didn’t involve printing new cash in the banking system.
The goal was to push people out on the risk curve rather than saving via long term Treasury bills. And do this without flooding banking system with even more cash.
The PBS special, “The Power of the Federal Reserve” is obtainable from their website for viewing.
Former Fed Governor Fisher said (around the 7 minute mark) that the Fed intentionally crushed the long end to FORCE (his word) investors to take greater risk.
Think about that for a second. The Fed decided…DECIDED, to FORCE the investor to TAKE greater RISK.
First, is that the duty of the Fed, to FORCE investors to take a risk they normally would not take? Why is that on their radar at all?
Secondly, this is a complete violation of “promoting moderate (not extreme) long term interest rates”. For 4000 yr lows in long rates are EXTREME by any metric. That mandate was placed with the wisdom to PREVENT the trick the Fed pulled….and that is why you won’t find any mention of “moderate long rates” in any recent Fed publication of on their web site. It is in the 1977 Federal Reserve Act….
SO the Fed has ignored Stable Prices (#2) and moderate long term interest rates (#3). Batting .333 is good in baseball, but……
Historicus – as I’ve mentioned before, I didn’t get the same takeaway as you from the PBS video. For me, it didn’t seem like Fisher was advocating the policy of forcing people to take more risk. He was commenting on what happened, and apparently it was over his objections in FOMC meetings, as described in Lords of Easy Money:
“Fisher, the Dallas Fed president, said he was “deeply concerned” about the plan [extending QE]. Of course, he didn’t let pass the chance to use a nice metaphor: “Quantitative easing is like kudzu for market operators,” he said. “It grows and grows and it may be impossible to trim off once it takes root.” Fisher echoed Hoenig’s warnings that the plan would primarily benefit big banks and financial speculators, while punishing people who saved their money for retirement. “I see considerable risk in conducting policy with the consequence of transferring income from the poor, those most dependent…”
(this was in 2011)
I did not lay this at Fisher’s feet.
I said he mentioned that this was the Fed’s objective.
His words were they did this intentionally to FORCE the investor to take more risk. That is my point. If Fisher objected, he didnt mention it in the documentary, but I will take what you learned from the book that he objected.
The Canadian trio Rush has a tune called “The Big Money.”
It played in my mind as I read the end of your first paragraph.
“Big money got a mighty voice
Big money make no sound
Big money pull a million strings
Big money hold the prize
Big money weave a mighty web
Big money draw the flies
Sometimes pushing people around
Sometimes pulling out the rug
Sometimes pushing all the buttons
Sometimes pulling out the plug
It’s the power and the glory
It’s a war in paradise”
Ni know some police officers starting to turn against the system ,they figured out they are getting shafted too
They are enforcers for the system.
In a good society that is a good thing
Yes you have it right. Winston Churchill: land is the mother of all monopolies.
I assume you are familiar with Henry George / Georgism.
Land prices are being used, as we transition into a post scarcity society, to enforce continued full-time working and the extraction of surplus value.
Workers create the value of the land, rentiers capture it.
worked in construction for 60 years, always ”part time” either per week or per year, with some of each many years, and now retired with no debt at all because ”thrifty” the whole time & now, not wasting money on $5++ coffee, etc., etc…
currently watching some ”kids” in their 30s-40s doing the same, working hard part time (40 or less hours per week for 7-8 months), actually less than i usually did
one really has many many choices these days, at least in USA, as compared with London in 1970, British Columbia in late’60s, Nassau in early ’60s, Florida in 1950s, etc.
Try getting out a little,,, might open your mind a little.
What you have written has no relation at all to my post.
What are you talking about VintageVNvet?
PS Things are different than they were 50 years ago ……….
Land is the ultimate for any monopolist …………
All the gold for you(s),
all the land for me, and a renter you shall be …………..
The system then works well until the lower ranks get as corrupt as the higher. With nepotism, corruption and infighting at the top the grand scheme wither away.
An example hilarious on where the USA is heading is a failed repo job that a news channel reported. Repo man is to tow a car when the debtor show up and say he can pay cash at the spot. Repo man can’t take the money, some workmates of the debtor show up. All police officers, they arrest the repo man and confiscate his tow truck. The repo man get out of jail the morning after and after a month or more he get his tow truck back.
Evidently someone has a book out telling the story of how Powell’s company flipped a business in a couple of years and made a lot of money resulting in US factory shutting down and moving to Mexico
Anyway you can get your “wealth effect” chart displayed for the next Fed hearing?
I’m sure they saw it already. It’s making the rounds. Since I started this series some time ago, Bloomberg and others (they’re all looking at my stuff) have come around too. But no, it will not be shown on the next Fed meeting. If a reporter holds it up (on Zoom) for the world to see, it will be a career-ender moment for the poor reporter, and they all know this.
They’ll probably blur it out with some made-up “connection issues” since the live stream most definitely would have a certain buffer to allow for such cases, and distort the sound as well to make it seem on viewers’ side as if the guy got dropped due to bad wi-fi router.
Wish I could’ve been at least partially joking on this one.
Sort of like the press coverage of the Canadian truckers’ drive on Ottawa. What? Where? Huh? (I mean, Eh?)
Why will this be a career ender moment for the reporter. It should rapidly boost his career if he gets to highlight this issue and then tweets about it and share on social media and it goes viral. Think of how many followers the reporter would get which implies his reporting will be worth far more in the future.
If he does not get the followers and career boost then perhaps the sheeps do not understand what he is talking and therefore they deserve the life they have.
“Why will this be a career ender moment for the reporter.”
Because the FED decides which questions you’re allowed to ask beforehand. If you thought it was free speech, you thought wrong. The reporting is all scripted, to stick to the FED’s narrative. Going off script to expose them would be akin to publicly embarrassing/shaming them, much like touching the Queen of England or showing her in a bad light.
Danielle DiMartino-Booth, who used to work for the Dallas Fed, talked about this. The FED operates behind a wall of complete control where they are above reproach. If you go off script you will never be allowed back in the room again.
Only CONgress can publicly call them out, but as you have noticed it’s really nothing but crickets with the occasional soundbite from Elizabeth Warren or Ron Paul or somebody. By and large the criticism is nonexistent.
The reality is that the FED does not give a f*ck about humanity. They’re all about making themselves and their buddies as disgustingly wealthy as is possible, and they’re doing an absolutely brilliant job of it. Where in the past it was somewhat covert, they recently just embarked on a stunningly in-your-face round of PIGGING out with their pig faces, as Wolf’s charts highlight.
And they even got busted for insider trading and told a few lies about it and nothing’s ever come of it. ABOVE THE LAW is what these people are. If this was China, Jerome Powell would have already disappeared, with his organs donated to somebody who needed them. For all of their corruption, even they have some standards. The US has zero.
If we still had kings, they would have these cretins lined up and executed.
Today, if they screw up, they just walk into the sunset.
@Kunal – The reporters allowed in aren’t the kind like Wolf who work for their viewers. They’re the kind who work for the corporate advertisers, and their bread is buttered by spreading Narrative Propaganda, not by going viral with the truth. Fortunately their ratings are tanking but until they let a truly free press into the briefings, we won’t get a dose of reality.
Unfortunately it takes more than a press credential to get into the DC briefing rooms. Wonder what it does take?
It is NOT the ‘nosy’ reporter but any one with integrity asking ‘hard’ ball questions in a Fed’s press conference, but also any known economist worth his name, won’t challenge the Fed openly! Once s/he does it, his/her career is over!
MSM and the Wall St cary the water for the Fed and their policies!
When their policies fails utterly as in 2008, all they said was ‘No one saw this coming’ This time Covid will be the execuse!
Former Dallas Fed Gov Fisher is the only dissenting openly but only after they retire from FOMC just like former VC Bill Dudley!
Prof Bill Black ( the author of ‘ To rob a bank, is to own one) was the director of Resolution Trust during Savings & Loan’ scandal in mid 90s. Many Bank executives went to jail unlike after GFC! Read his frank opinions on the current Fed online!
The king owned the country. Now, who own the country today? By issuing debt and fiat currency.
they will show it, but with all the labels reversed, we are governed by Psychopaths.
15% increase? I wish. In San Diego, ours rose 32.4% on an already very (very) high absolute amount.
It seems we live in a fascist State where the non-establishment line of questioning or view is never allowed … by the Government, Media or Central Banks.
I am about halfway through “Lords of Easy Money” and am very surprised that Powell was the point man fighting against to Bernanke’s irrational and catastrophic push to continue ZIRP / QE as a general policy, instead of terminating it after using it in response to the 2008 financial meltdown emergency.
Summer 2011: $1.5 trillion excess cash reserves were in banking system, a “96000 percent increase from precrisis levels.” All that liquidity had not significantly strengthened the economy or employment, yet “Bernanke became single-minded in his drive to do more.”
Summer 2012: There was more internal FOMC opposition (6 of 12 members dissenting or criticizing) to Bernanke’s push for a new round of QE. Bernanke began politicking within the FOMC to prevent the outside world from knowing there was opposition to his proposed escalation of QE.
One of the three strongest opposition governors within the FOMC was Jerome Powell, who become a “formidable critic of ZIRP” within the closed sessions. Powell’s arguments were similar to Hoenig’s (who had retired). But he was listened to more seriously because of his career in private equity dealmaking, creating and selling risky debt.
From the time he had joined the Fed, Powell described how risky debt could become the the broader economy. During the years he rose to power, he “provided some of the clearest warning of just how dangerous quantitative easing might become.
The book seems substantially factual, drawing from FOMC notes, and insider interviews. Has power changed Powell so much? If Powell becomes his old self again, Mr. Market had better watch out.
The “Lords of Easy Money”should be mandatory reading for all politicians and all of the talking heads on TV. Unfortunately, the name of the game is do whatever is necessary to obtain wealth and power. That includes driving a heavy truck over grandma.
The difference I see is that he wasn’t going to be blamed if things fell apart.
The FRB chairperson is the face of the agency. The public has no clue who anyone else is, to the extent they are paying attention at all,
The rent-seeking economy where those who own land and property make mad coin, while the serfs have to work to enrich the landlord class.
And then you have the “disruptors,” like Airbnb, VRBO, Uber, Lyft, Turo, Ridester, RVshare, etc., which encourage people to saddle themselves with extreme debt levels by borrowing for a durable good they cannot afford, then renting it out to try to make the payments and eke out a profit. The only people who do it are those who flunked out of math, because there is no profit. They end up with a burned out depreciating asset and no money in the bank.
This is all a result of the financialization of the entire eCONomy, care of pigmen central bankers and all of their subsidiaries selling loans to the masses the world over, propped up by fraudulent IPOs and scumbag attorneys providing protection from local authorities by litigating in court for years so that their illegal businesses aren’t shut down (Uber, Airbnb).
Oh, there’s profit all right, just not for the marks stuck with the debt and the worth-less depreciating assets.
I think it fair to have VRBO, etc…
What is out of the ordinary is mortgage rates half of what they have historically been in these conditions….
Mortgage rates have no business being this low with 7% inflation…and there is only one reason they are this low….
THE FED WANTS THEM THIS LOW. One might wonder what the Fed is doing at all in the mortgage business..
The “wealth effect” chart really should have a logarithmic Y axis to be meaningful.
Seems like that would make the chart LESS meaningful for the purposes of showing who the “Wealth Effect” really benefits.
Inequalities in mirror may be larger than they appear!
Agree, unfortunately Wolf is often using nominal charts, great for short term trends, but not a great idea for long term trends. Our minds are not made for comparing exponential rates so the only thing you can discern is that everything is somehow rising. Either adjust for CPI or if you if you don’t likle to correct by a government fudged metric, use ratios between nominal values instead.
It’s a little off subject, but it seems there’s another “qualitative” aspect to the rental transaction… related to how the renter is treated by the property owner.
I imagine that if “asking rents” have moved up significantly, then the owner has a perverse incentive to minimize complaint response time and apartment upkeep in order to nudge current renters out… so they can bring in newbies at the higher rent level.
Just one more of the thousands of unintended consequences of monetary manipulation and experimentation.
JH – your speculation may be true in big rentier cases, but it’s too much a generalization.
For one of my house rentals, there is no need for manipulation. My property manager told me the rent should be raised, and they simply inform the tenants (original lease expired went month to month).
For my other house rental, I don’t want to raise the rent on the old fixed-income retired couple as long as my margin is okay and minimal repairs.
Many landlords invested and planned for the rental income as part of their retirement. The writing was on the wall about 40 years ago as pension systems started disappearing, employee benefits shrinking, and cash savings losing value as well as dwindling interest rate returns.
the flip side is that, for a landlord with new tenants who are now paying 15-20% more than last year’s rental price, those tenants are going to expect everything to be working perfectly.
And now they have 20% less discretionary income to spend in the real economy. So good luck to all those companies looking for new customers. Not only is that not happening, they’re going to be losing existing customers. High shelter costs destroy the economy.
The lost discretionary income would not actually be 20%. You would have to know what their discretionary income was, then divide the rent increase by total discretionary income to figure that out. But I think I made my point. There’s only so much money to go around.
Except in a few rent controlled jurisdictions, there’s nothing preventing a landlord from demanding a rent increase at the next lease renewal point. The tenant of course though doesn’t have to accept it. He or she can just move out.
No landlord can charge more rent than any renter is willing to pay.
The unit would just sit empty until the landlord lowers the price to the market rate.
Yes, of course, but that wasn’t the point of the post.
The OP suggested ‘mistreatment’ of the tenant as an inducement to them to not renew – so that more rent can be charged to new tenants.
I was simply pointing out that that wasn’t necessary. The landlord can just raise the current tenant’s rent at renewal.
We seriously need to build more housing, and the right size housing. We keep building large singly family homes while the average family size plummets. My old neighborhood was 3br ranchers and the average no. of kids was 2-3, now they are building mini-mansions, for power couples (no kids, just a pedigree dog) that are 3x the size. In Europe, houses of this size would be carved up into multiple apartment units. In CA they surround metro rail stations with single family homes. No wonder we appear to be running out of land in metro areas. I’ve been looking at 55+ communities. Generally no apt/condo option, only single family homes (many quite large). Madness. Local bldg regs and NIMBY to blame….
we don’t need to build more housing. we need to remove the perverse incentives that lead to people trading housing like collectibles.
The US also doesn’t need an increasing population. I can provide several mostly extremely unpopular policy changes to incentivize it.
The problem is that most of the 3br ranchers are in old neighborhoods where many are purchased by first-timers who really can’t afford them. They can’t afford to keep them up either. These are neighborhoods that used to be nice but not so much anymore. In most places today, what you find in GOOD/SAFE neighborhoods are BIG houses. You want more space than you need? Or you wanna live next door to the guy with used tires leaning against the garage, knee-high grass and wearing a “wife beater” shirt? I’ll take the extra space.
Gradually ease in a ban on foreigners owning land in the United States, or add a tax like in B.C. and there would be more than enough housing on the market to house every so called homeless person, rents would plunge, and there’s be no shortage of places for you to rent.
They do that in Parts of Mexico and many other countries.
Increase property taxes on second or additional homes owned by anyone. Not just a small increase but a very large increase.
People with 2nd and 3rd houses are part of the problem. Does anyone really need a year around place in both the sunbelt and the frost belt ?
Reminds me of the Senator (R) who didn’t know how many houses he owned. He thought maybe 7. but wasn’t sure.
“People with 2nd and 3rd houses are part of the problem. Does anyone really need a year around place in both the sunbelt and the frost belt ?”
I wonder if “working snowbirds” are becoming commonplace now that work is no longer tethered to specific office locations.
2nd house makes a lot more sense when you can spend a season or two there rather than just vacations …..
I own 3 homes, and I dare you to do anything about it, bigmouth. Bring it on. That’s the problem in the US, all talk and a lot of insane action.
We are at the beginning of the end game here folks, the final act.
Private Equity/Corporations/Etc. are making a grab for really the last thing Americans supposedly “own” which is their home/land/rent. We are in a “eat your own moment” and the fact that we have no morality at large is allowing Blackstone/private equity/etc. to begin to amass massive portfolios of private residences/apartments/land/etc.
Forget about Bernanke/Powell/etc. You are seeing the organized plundering/looting of the last remaining economic ownership of the American middle class. The fact that America has no morality and no culture/societal checks on the financial system cannabalizing the everyday person. In case you are wondering the solution is not coming from the FED.
You should address Fed chair with scumbag. He singlehandedly stole trillions in the overall share of wealth and assets from American working class and handed over to the rich.
Every time I see his smug expressionless face, it makes me want to own a punching bag more. Then again seeing Greenspan’s vulture face invoke the same feeling as well.
…they aren’t making any more Fresno!
“In the US overall, across the 100 largest markets, the median asking rent”
CPI does not report median and its a bit misleading without accompanied by the mean. I wonder if mean rent went up by double digit percent too. I assume no because many high volume heavyweight rental markets (SF, NY, etc.) did decline substantially. If mean rose far slower then Fed will not pay attention.
POS Weimar Powell don’t give a flying F about regular people, if your regular joe needs a reminder of it, the data that Wolf showed does an excellent job illustrating that point. Oh I am sure it’s transitory..wait they retire that word a while back, so now they are combating close to double digit inflation with .25 basis point at a time…fight that fire with a teaspoon of water at a time, it will work for sure.
Powell boy must be a George Carlin fan, he sure does take this line to heart “It’s a big club and you ain’t in it”
The big club is for beatings -haha
I hate to say it, but due to the sh**ty state of basic education in this country, your average joe doesn’t know how to read and comprehend at this level. He does know he’s mad and wants to elect Trump again which should certainly boost his standard of living…
Couldn’t agree more. I know it comes off sounding like an elitist when we discount majority of the population of not knowing the deep impact of monetary policy but seriously I can count how many friends or family that even know who Weimar Powell is, let along the consequences of his action.
San Diego rent increase explains why the rents in Tijuana increased so much. There are even more low-income Americans living down here than before the pandemic. In 2019 the median rent for a 2-br was $500 (yes, dollars) now is close to $900! Only a quarter of the population can afford it, since a wage in pesos cannot compete against the Americans wages and landlords only accept dollars. Thank you, Mr. Fed Chair Powell Sir!
Fresno rent exploded due to the Bay Area and LA people moving here. We have many people driving with high beams in our famous Tule fog this winter. I pass them and think, “must be from LA….” Many long time locals are priced out of the rental market in the safe parts of town. Countless desperate pleas for moderately priced rentals on NextDoor from families with school age kids who don’t want to rent on the rough side of town and send their kids to the schools in that neighbor. Sad. Many friends priced out of the housing market that are looking to purchase. Many investors buying up new builds and turning around and renting them out after closing. Houses have gone up 100k. The Fresno market is pure insanity.
Dear Mr. Wolf Richter,
Mortgage interest rates spiked over 10% in one month.
I do not know what rents in my area are. Land is cheap, thus they are building homes and the population is growing. Some years we get a touch of frost, some years no frost. Invasive green iguanas have been damaging canal sea walls.
Oh, don’t worry. Soon these grunts will have a direct FED account, and the FED will pay the rent every month.
It’s now to the point where those who are into status are buying up the $500 Snow Peak tents so no one will think they’re one of those $100 Coleman tent scumbags on the opposite side under the freeway. And then there’s that lowly tarp bunch over by the bridge…
It’s a brilliant point you make.
1. when you have house prices (land prices) detach from wages you create a class of “forever renters” who are then left without any choice other than to rent.
2. when you have rentiers (who by economic definition create nothing) making big incomes, you must also have people who are giving up value they create to the aforementioned rentiers.
This dynamic will not end until you create laws/regulations/taxes that suppress rentier activity. Rentier activity has been with us since forever, you used to have regulations to prevent it, like the breakup of monopolies. Traditionally the USA didn’t need land taxes as the antidote to land monopolists was to “go west”. Now that you have full enclosure (all land is owned), that doesn’t work and you need to engage with this dynamic. The very same dynamic that saw people flee to America to begin with, to escape the feudal strictures in Europe which were enforced via land ownership.
None of this is ever, ever discussed in any way in the USA.
As someone that has worked as an realtor who leases tons of apartments I have theory as to why rents have been skyrocketing in Providence for the last couple of years. When Covid restrictions were put in place it was extremely difficult to evict anyone which created an artificially low number of units hitting the market. Landlords could ask higher prices because people simply didn’t have to move. Now it has gotten even worse because of the rent relief programs. Tenants who don’t pay their rent can get their rent paid for 18 months which again is creating an artificial scarcity of apartments. Because there is very little supply hitting the market landlords can basically ask what ever they want and this has more to do with the federal governments programs than the fed. What is coming in now is Mortgage relief programs. I am told that any of the excess monies from the rent relief programs are going to roll into mortgage relief. That program is slated to go on into 2026
Dear Mr Richter Sir,
Who are these “people” and why should I care about them? A good friend of mine, Eddie Temple used to say the following:
“You’re born, you take sh**. You get out in the world, you take more sh**. You climb a little higher, you take less sh**. Till one day you’re up in the rarefied atmosphere and you’ve forgotten what sh** even looks like. Welcome to the layer cake son.”
Cheerio. Love your site by the way.
The US is falling to pieces in a multitude of ways, and life is becoming harsher and harsher for many Americans. But our government’s priorities are looking for countries to sanction and wars to start.
This situation has happened many times in history. Maybe in his next press statement he will say something about eating cake. Then the riff-raff storm the Bastille.
Conflict is inevitable. Looking inwards for potential solutions is not what Americans do. Who sent jobs overseas? Americans. If you can’t even face that truth, I think pretty soon it will be “we’ll fix everything once the Ruskies and the Chinese have been brought to heels”
“But our government’s priorities are looking for…wars to start.”
It’s called a diversion, to sidetrack efforts to oust the current regime and to stoke patriotism. An old trick.
Nobody believes these jokers any more. Just look what the bond market has been doing since the beginning of the year. 3 month T-bill at 0.2 %, 1 year bill 0.7% 2 year treasury 1.1 %. Fed funds rate stuck at 0.05. what a joke. 10Y-2Y spread now at 0.6%. So much for “4 rate hikes”.
These guys are not behind the curve, they are out of the loop.
IF someone had told you inflation would go to 7% and the Fed would not raise rates…..well, who would have believed they would be so inept, so disregarding of their duties?
And it continues….and they are “keeping an eye on it”, etc etc.
The biggest theft and wealth transfer in history and crickets. The silence suggests complicity.
What are you talking about!
According to every stat my office keeps the top 1% are richer than ever. They are buying anything their hearts desire. Assets are piling up everywhere.
As for the rest……my text book on economics written by Marie Antoinette states very plainly…….let them eat cake.
As I’ve indicated many times the FOMC is aggressively meeting the threat of higher inflation….why just last month we agreed to meet again in March to discuss ordering the paper needed to create a preliminary work plan towards possible action taken to plan our July meeting, at which time we may decide to order the pens. Yours truly, JP
This guy (the folks keeping him in place) could care less about inflation. Their stock market, bond market, Real estate assets are all sky high while what we face means very little.
As always throw a few crumbs to keep us in line…..and destroy any threat to their leadership by taking out the saved capital thereby making us more dependent on the crumbs.
Inflation up from 2% to 7%….in seven months…
That’s 5%. 5% divided by .25 is TWENTY…..TWENTY 1/4 pts…
and the Fed is keeping an eye on inflation and maybe, just maybe four 1/4 pt hikes in 2022. IMO that leaves them 16 short.
Can anybody ask the right questions of these people?
My comment is for all of you Gen Y and Gen Z readers out there, whose futures were stolen so that the rich could amass fantastic wealth never before seen since perhaps the days of slavery.
Don’t focus on how you can buy a house, or afford a car, or any of that big ticket stuff. Focus on how you can destroy the FED and this evil cabal that has chosen to wage war against you. Rather than play their game, come up with your own game which ends these peoples’ grip on your futures. Your livelihoods depend upon it.
i’m looking forward to my generation taking control and cutting off social security and medicare for good.
And I suppose you will make drilling for oil illegal too! LOL
I felt the same way when ss was getting stolen from my check. Once you are on receiving end you will feel like you paid in and lost use of the money for 30 years so now I feel like I deserve it. Didn’t have any say in the matter anyway.
Hahahaha, by the time your generation is in power, they will see the benefits for themselves of Social Security and Medicare. Every generation goes through this. Boomers did too. Boomers hated having to pay for this stuff when they were young. And now they see the benefits of having paid for it all those years.
So sure, look forward to your generation ending SS and Medicare, and when they get to be 65 and cannot afford health insurance anymore (you know that health insurance gets a LOT more expensive when you get older, and you become essentially uninsurable when you’re over 65). But because there is no Medicare, the less-than-super-wealthy of your generation will just die in the gutter.
yes, but the difference is that my generation didn’t ride up an asset bubble at the cost of the generation behind me. it’s really grating to know that my peers can’t buy houses while their parents’ generation has houses that they paid 1/10th their current value for, all while they’re expecting us to pay for their health care and social security
Our asset bubbles blew up in 2000-2002; and then again in 2007-2009, and now, when lots of boomers want to draw on their assets, it’s fixing to blow up again. And yes, boomers have been through every single recession you have been through, plus a bunch of bad ones you weren’t around to see. Lots of boomers on the street homeless.
Wolf, the economical effects of Medicare/Medicaid on this country would be a great article!
The Fed and the Govt just saddled your generation with $21 Trillion in new debt.
For the first 215 years of this nation, the national debt was $9 Trillion. It is up $21 Trillion in 12 years….on your back.
It used to be incumbent on each generation to pay its own debts.
Where’d the money go? To stock and real estate…..bidding up and away from your generation any reasonable entry price into either stocks or real estate. They are using the money from your future to do this. That is where your anger should be directed, IMO.
A lot of the borrowed Federal dollars in recent years went to pay for the Middle East wars and for the Bush 43 tax cuts. In 2004, a lot of politicians and voters were more concerned about stopping gay marriage from spreading beyond Massachusetts than about Federal deficits. Now their children will have to deal with the consequences.
By the time your generation takes control, Social Security may well be means tested (as is the Old Age Pension in Canada) and Medicare premiums will be much higher for higher income people. You might want to read up on Medicare premium surcharges for higher income seniors which have been in effect since about 2007.
LOL, pipe dreams! Not gonna happen. Visions through an hour glass. So shortsighted! The only change will come through ‘compromise’, and you are only one vote. Unless, you are voting for everyone?
Yep. The Fed is using Gen Y and Gen Z’s money….THEIR OWN MONETARY FUTURE….to bid away the price of housing and stocks …and deny them the ability to SAVE.
They are using THEIR OWN MONEY against them, and for the benefit a small cadre of financiers and the like who are getting filthy rich at their expense.
If the Fed had been held to “moderate long term rates” the nefarious mechanism could not have been employed. Non extreme, ie moderate long rates, would have at least put cost to the game.
I wonder what is going happen when my grandkids grow up and get handed a national debt of 60 trillion dollars?
What if they just vote to refuse to pay?
Defaulting on the debt might be the best thing they can do.
Sure, there will be repercussions but onthe other hand they can start over with no debt.
Just wondering, I won’t be around to see it.
Memo from the Chairman to all concerned: Ref: Wolf Street Pleading for Relief Post, 01/31/22 Memo: Congress has abandoned you. Therefore, Go F$&k yourselves, piss ants. cc. Wolf Street, Wolf Richter
Bay area and southern california transplants who moved to fresno have driven up rent in fresno. not a good example.
Never thought I’d see the day that Fresno was a draw for well-healed transplant folks.
But rents spiked in Southern California too. 1-BR rents in San Diego +15%, 2-BR rents +20%. If your theory were correct, rents should have declined in Southern California, or at least leveled off.
Southern California is typically the last place to see rents drop. Shorts, T-shirts, and bikinis in January. I know there’s nothing empirical to what I just said, but it’s true. Young folk sure want to be here. If there was any doubt just check out San Diego’s Gaslamp area on any given weekend night.
So, what I’m seeing with my younger customers is gobs of out of county/out of state money that relocated here due to work from home. Tons of folks from the Bay Area. Dual Income No Kids, and both incomes seem to be substantial, like engineers, doctors, etc. San Diego county is quickly becoming even more affluent than it already was.
You’re a liar, you will never see bikinis in January, it’s too cold. But keep believing the fantasy and paying all those taxes
Hahahaha, wrong. Another dose of outsider nonsense (you’re dialing in from Hawaii, LOL). On a sunny day in January, you’ll see bikinis on the beaches in Southern California, no problem. Even I see bikinis in January in San Francisco where the water is really cold in the winter (now about 52 degrees), but we swim in it anyway because it’s the only water we have, and because we’re not pampered with warm water, like you folks in Hawaii. We don’t even use wetsuits at my swim club. The water temperature in Southern California is much warmer than up here.
Maybe it’s time you get out a little more.
In Minnesota, you don’t see bikinis in January. Proper attire in the sauna is your birthday suit, or a towel wrap if one feels the need to cover up a bit.
Iona, you clearly don’t live anywhere near the beach. Calling someone a liar is pretty harsh. In San Diego daytime temps in the 70’s are pretty common for January. Certainly you’ve heard the expression “sunshine tax”.
The Bob who Cried Wolf,
Iona dialed in from Hawaii and seems to be relying on bikini headlines from ZH. I mean, this nonsense about California gets really funny after a while.
CA has a lot of attract for young professionals just out of college who want to make $100K+ for their first jobs. And they don’t have to drive in or shovel snow on the way to work or the beach. If they don’t like that job, they can walk across the street and make more.
A lot of young people to meet and date in S. CA who make as much.
They pay for it in rent, but a 1 or 2 bedroom apartment rent for $3K is cheap when a young couple is make $200K-$300K/year.
Even when I was young, CA was the hip place for the newlywed and nearly dead (The people who bought a house a long time ago and benefited from Prop13).
The only place I see bikinis is on Wolf’s Site. These ads are getting more revealing every day. I’m waiting for the day they are totally nude. Ms Swamp was chewing me out the other day, and wanted to know WTF I was lookin at.
why wait — raise the interest rate 7%. time to let the other 95% live there lifes.
So I guess people are STILL leaving Chicago!
From 2009-2015 the FOMC had a ZIRP and implemented multiple rounds of QE to expand the Fed balance sheet by almost $4T.
But if you look at historical rent indices during this period and a few years after (to account for a possibly delayed effect) from say 2010-2019 just before the pandemic, they look very similar to the previous decade 200-2009 fluctuating within a narrow 2-4% rent inflation per year.
So why is it different this time?
Why did ZIRP and multi-trillion dollar QE cause a huge rent spike this time but not for the previous ZIRP and rounds of QE?
Or is there another explanation for the massive WTF spike in rents?
Dazed and confused…
Ever rock back in a chair, on the two rear legs?
And you get to a point where its kinda balanced and kinda fun…
then you go one inch to far and over you go….
It’s not about ZIRP in isolation.
Rents increased because this time the value of the underlying assets (i.e., houses) rose significantly.
and people are being punished 7% for saving their money.
That’s kinda different.
These rental indices also put the historic house price appreciation over the last year or so into perspective.
19% YoY national house price inflation does not look completely crazy when rents are up by 12-14% in the same time frame.
i know people on this blog, including wolf, think it’s crazy conspiracy theory territory, but i’m finding it hard to believe the fed wasn’t behind today’s rally.
Well – I noticed that some of the more dovish Fed governors – Daly, Kashkari, Bostic – were opining publicly over the weekend – so maybe that soothed some investor concerns over the pace of rate hikes.
Neil Kashkari is a GS alumus (that says it all!) was the guy who was in charge of dustribution of TARP during GFC! He was trained under for Treasury Scry Paul Hankson ( instrumental in bailing out AIG and saved GS from bankcruptcy!
These are all the ‘ ‘brokers’ doing the God’s work” !
Neil Kashkari has been recruted for the Plunge Protection Team 2.0. Hank Paulson has taken a break from bird watching and is giving him advice on how to proceed.
Kashkari was Hank Paulson’s boy….the G Sax brotherhood.
Kashkari is an MMT guy, and will do anything to be Fed Chairman…IMO.
The FED is going to do everything in their power to promote and maintain these asset price bubbles. That’s all the FED is at this point – an asset bubble facilitator and protector.
It’s difficult to believe that there is any organic functionality about the markets anymore. It’s disheartening to try and invest at any level knowing there’s front running and high speed computer trading using billions of dollars to move the markets in a specific direction. The definition of conspiracy is “an agreement between two or more persons to commit a crime or accomplish a legal purpose through illegal action”. This is rampant on Wall Street. So yes, it’s a conspiracy. But it’s not a theory.
Remember — things don’t go to heck in a straight line.
I told you a week ago we would get a rally that “will make your ears ring” because there always is after these big sell-offs. It never fails. Nothing Goes to Heck in a Straight Line”:
Jim Cramer was on CNBC this morning repeating the same thing that he has been saying: “J Powell is doing one heck of a job”.
he’s doing one heck of a job fluffing the asset markets. doing the job he’s purportedly being paid to do, not so much.
Cramer’s that impossibly annoying guy in the movie who is ceremoniously killed off at the very end, with the audience all clapping and celebrating.
Larry Fink feels the same way.
“J Powell is doing one heck of a job”.
In my city and state, rents are set by LANDLORDS, not the FED. I have tenants whose rents I’ve raised substantially and others who, because of their financial or family situations, I haven’t raised in 4 or 5 years. Their rents are now 30-40% below market and I’m OK with that (although some say I’m an idiot), just as I’m OK with the ones who are now paying fair market value.
Rental property is a business, BTW and as property owners, we risk our hard earned capital and provide much needed housing. Just look at 2008-2011 and tell me there’s no risk in owning rental property.
We also support our communities through our taxes, insurance, mortgages, association fees, payments to local businesses and service providers who maintain and repair our rental properties, local hardware stores and appliance dealers we buy from … and on and on and on
that is generally true, but it hasn’t been true since the central banks decided to put floors under asset prices, enriching people who already owned property at the expense of the younger people and renters. since then, there’s been little risk.
“In my city and state, rents are set by LANDLORDS, not the FED.”
Yes, used vehicle prices are not set by the Fed either, nor are house prices, nor are the prices of butter or milk or beef. The Fed creates inflation — asset price inflation and now consumer price inflation via various mechanisms. This means the Fed destroys the purchasing power of the dollar. That’s what the Fed does. It doesn’t set prices. Prices are a result of what the Fed does. There are a gazillion articles on this site explaining this stuff.
CCCB said: “In my city and state, rents are set by LANDLORDS, not the FED.”
Rents are set by the market. If you, Mr Landlord are the market, then you set the rents, otherwise you can’t dictate but must work within the parameters. The FED distorts the market, creates inflation, and puts extra dollars in the pockets of many a landlord.
The FED and our government subsidies turn many landlords into trickle through welfare recipients. If that’s you, well ………………
Rent hikes are going to hit keep pressure on the CPI and scare the crapola out of the politicians and investors alike. Sad times.
Waiting patiently for a single reporter to bring this up at a press conference.
Maybe all the folks who read and post on Wolf Street ought to forward the chart to not only journalists, but politicos.
Anyone have a suggestion?
I have been thinking of printing some of Mr. Richter’s charts and mailing them, via USPS, to Powell along with a personal letter from me. But I haven’t asked Mr. Richter about this. It’s his work. We’d need his permission. I’d like to send the same charts to my representatives in congress as well.
My work is copyrighted, but that allows for making a copy and sending it to someone. No problem. You just cannot republish it (say, in a newspaper) without permission.
Any reporter who asks a genuinely uncomfortable question will told they are no longer reporting on the Fed by their newspaper.
The USA cannot improve without some kind of society wide discovery of backbone.
Its not just the Fed. Biden is directing 45 billion of the Emergency Rental Assistance to post-covid rent support.
Effectively using printed funds to deal with the consequences of printed funds.
“Biden is directing 45 billion of the Emergency Rental Assistance to post-covid rent support.”
This is also bailing out landlords. Landlords have bills too. When landlords can’t pay their bills, banks start to whine.
A recent report shows that 10% of all housing in NYC is empty. So they buy up the homes, legally prevent anyone from living in 10% of them, then jack up the rates by 25% as the middle class struggles to find a seat in the game of musical chairs they created.
Every shell game that big business starts in NYC eventually finds its way into your town if it isn’t already there.
How do they legally prevent people from living in a home? I doubt that the legal structure for doing this would work most places.
It seems like 90% occupancy would be pretty good in many contexts.
Just read in the Chron that there are 40,000 empty homes here in San Francisco. This many in a 49 square mile city.
Yes, this is over 10% of the total housing units that are vacant.
But wait… that number of vacant housing units was for 2019 (the City report used Census data for 2019). There is no data what this looks like now, but given other data from 2020 and 2021, it appears that there are a lot more vacant housing units now than there were in 2019.
We have inspected over a dozen homes since Jan 1st in DC. Every one of them was empty. I think 10% vacancy rate is way off the mark.
Since 70% of the 6.9% GDP growth claim was admitted to be due to private inventory build-up in a time of supply chain and transportation problems and the 1Q 2022 forecast is 0.1%, was that inventory build-up due to collapsed demand?
“The initial GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2022 is 0.1 percent on January 28. The initial estimate of fourth-quarter real GDP growth released by the US Bureau of Economic Analysis on January 27 was 6.9 percent, 0.4 percentage points above the final GDPNow model nowcast released on January 26.”
Many of you sound like you would like the government to take over the rental housing market as a way to keep rental housing cheap. It would be a bad trade. Yes, the rents might be lower but the maintenance would be terrible. Think of the public housing complexes built in the US since the late 1930’s.
Did you notice that Texas cities are well down on Wolf’s lists even though Texas is a rapidly growing state and its major metro areas keep attracting businesses from other states? If you are looking for villains to blame, try the cities that practice rental control (banned with few exceptions in Texas) and/or restrictive zoning. No one wants to see their single family neighborhood invaded by high rise apartments.
I don’t know why so many of you are blaming the Fed. Low interest rates ought to encourage new construction but many communities are notorious for piling on lots of new construction fees and outright ban new housing more than a few stories high.
“Did you notice that Texas cities are well down on Wolf’s lists…”
Out of the 100 largest cities, these are the Texas cities with 15% and more in rent increases:
#8 Austin +26%
#21 Laredo +18.5%
#24 Irving +15.5%
#25 El Paso +15.5%
#29 Plano +15.1%
No one can argue with your figures and there has also been record house price inflation in parts of Texas but I still think that Anon1970 is onto something.
People have been migrating to Texas in large numbers for decades and Texas has historically been pretty good about accommodating them by building lots of both houses and apartments with relatively few restrictions compared to many other places.
Unfortunately, the pandemic caused shortages of all the inputs to construction (labor and materials) so house and apartment building has not been able to keep pace with the immigration from other states this time around.
One would hope that the situation will improve once the pandemic becomes endemic and more new supply will become available soon to balance out the increased demand.
Totally BS. I grew up in North Texas, and I’m here to tell you that unrestrained greed and growth has ruined my home town. There are 3-5 story apartments, town-houses, condos, and built-to-rent houses being jammed into every available scrap of land. Local businesses are being choked out by ludicrous property taxes and chain stores. Our city banned fracking, but it was overturned by the state government. Our local crooks conned us into buying a $250,000,000 NG plant which was supposed to make us energy independent. Then the power went out, rates went through the roof, and we now have a $300,000,000 bill that tax payers are on the hook for.
So don’t talk about how Texas is different. If you think that, you’ve never seen Ted Cruz talk.
Very well Stated. Texas is only said to be different if saying that fits the narrative that you want believed. Just as much BS transpires there and a lot of it sadly got imported. 😂🤑🤡
What does Texas have?
Lower income tax and higher property tax.
It hits rentiers not value creators, encouraging real work and discouraging rentier activity.
Ha! Texas gets most of its wealth by pumping it out of the ground. It’s the ultimate rentier economy.
Do you really think the “rentiers” just eat that extra tax burden? Who do you think they pass it on to?
So, rents for ordinary people are zooming which leaves not a lot left for things like food, fuel, heating. The ordinary people paying these huge rents could find themselves the heat or eat club.
On top of that, even if natural gas prices only rise a bit, you realise that the very fertiliser used to grow that food is also zooming because most fertilisers are made from natural gas. Therefore, those food prices are also zooming.(or will really zoom after the next harvest season) Somehow, i find a never ending circle of poop coming into the lives of many, it’s called inflation Mr Fed, inflation.
Rent from Blackstone, install a woodstove, and start dismantling the house and burning everything that’s wood for heat.
I love it DC!
It is clear Powell is a madman with a printing press. The markets know he will never seriously raise rates. Corporate earnings are still coming in positive despite covid and a major slow-down in China. The wealthy buy homes for sport and workers must move into apartments.
Do you think he cares about the little people? Not a chance. I’m pretty sure his rich banker friends use charts similar to yours and congratulate Mr. Powell on the fabulous job he is doing. Another decade of Powell-conomics for the wealthy. Hurray!
Interest rates spikes on the horizon now. Let’s see how the real estate market holds up to mortgage rates in the 4-5% range in the coming six months.
Just a few long-term trendlines to break before interest rates get unhinged.
He’s a carbon copy of Dr Havenstein, the finance minister of Germany in 1923/1923 who was quoted as saying
“We had to destroy the German currency in order to save the country from a breakdown in civil society”
Germany’s financial problems started in WWI when the politicians refused to raise taxes to pay for the war, thinking that Germany would win the war and be able to impose reparations on the defeated countries. Things did not turn out that way. The US went one better than Germany by cutting taxes in 2001 and 2003 even as it was printing money to pay for its Middle East wars.
We are not the shining city on a hill; maybe we never were even if the US looked pretty good to refugees living in Casablanca in 1942 waiting for their US immigrant visa.
Back in the hey day of housing, there were huge forests in the Northwest and Canada.. They cut them all down in a big hurry. The government even built the roads into the forest at taxpayer’s expense to facilitate the fast cutting and the nation built houses.. Many of the trees were big enough to build two or three houses.
Today there are just toothpicks for trees and it is very expensive to get them processed. The availability of lumber and the price will never be as available or as cheap.. Sure there has been some innovation but …
Back in the hey day, the land was abundant and the rules to create a housing track were much less. Now it takes a bevy of lawyers and huge sums of money to get an approval.
Back in the day will the rules for water and sewer and electricity were much different. Nothing is as cheap.
In the mean time the country got crazy and built Mc Mansions.. And the population grew..
We will never again have the cheap houses.
We recklessly used up our easy to get resources and now every part of a new home is less available so more expensive.
That is all besides the FED and the big institutions financializing housing and turning the public into debt slaves.
The world has changed and our mind set hasn’t yet adapted to it.
I read an interesting article on how Finland, land of happiest people in the world, destroyed their forests in a similar way. Search for:
“‘We’re basically starting from zero’: Restoring Finland’s river ecosystems.”
“Back in the hey day of housing, there were huge forests in the Northwest and Canada.. They cut them all down in a big hurry.”
I remember flying many times between SE Alaska and Portland, Oregon, ub the 1990s and seeing the 1000-acre clear cuts in BC. 1000-acres! On Federal lands in the US the maximum is 20 acres.
I doubt if this is still permitted, but I don’t know.
Ever seen a post about a falling down shack in Vancouver selling for $2mm?
Of course you have.
Why $2mm? It’s the land.
What created the value for that land? Location.
Who created the location value? Society.
Tax the unimproved value of land and watch this ship turn around on a dime.
I think that the Fed would argue that the WTF spike in rents is due to the increase in demand and reduction in supply due to the pandemic.
I think they would point to the historical record of ZIRP and QE having been done on a massive scale in Japan for the last couple of decades and EU last decade (and here in USA from 2009-2015) without causing rent spikes.
I think they would argue that what’s different this time is the impact of the pandemic (or restrictions imposed by governments in response to the pandemic) on both supply and demand.
Ho would y’all refute that argument?
No need to refute that argument. Just agree, and point out that it was Fed policy that
1. created insane surplus liquidity through ZIRP and QE
2. CAUSING caused the increase in demand and inflating assets
3. which results in higher rents required to service the debt taken on to buy those assets
Some of the Fed governors and regional bank reps predicted this would happen way back in 2010.
But 1 and 2 were true from 2009-2019 but never resulted in 3 until 2021. How do you explain the delay?
And the pandemic is just a coincidence?
Hoenig, Fisher and the other anti-QE folks in the Fed strongly warned about the delayed effect of QE back around 2010 to 2013.
As QE ballooned the money supply in 2009 to 20019, investors didn’t need rush into real estate assets. They were making beaucoup money in the stock market and other ways (dealing dangerous legal drugs, etc.).
The volume of money in the system slo-mo vaulted to super-hyper-liquidity levels…
1. In the end, what the anti-QE people warned about did occur. Asset inflation peaks foamingly, and for smart money that means time to cash in, hedge, and find other less peaked out assets.
2. Where to put your extra money to work? Can’t make much money loaning it out (bonds, etc.) — not much demand for borrowing because of ZIRP.
3. Natural tendency is to increase real estate holdings. Collecting rent replaces stock gains, dividends, as well as loan interest.
Read Lords of Easy Money for a good explanation of the delayed dangerous risk effect of QE.
A drug addict may last for years and be functional, without going into crisis.
Thanks for taking the time to elaborate your thesis. The mechanism you described sounds plausible but it doesn’t really seem to fit the data.
Both the US stock markets and housing markets were booming for several years prior to the pandemic. By traditional measures of value (e.g. Shiller CAPE and price/income ratio and price/rent ratio), both equities and houses looked significantly overvalued prior to the pandemic – indeed some commentators like Wolf were calling both bubbles.
And in 2021, US equity prices appreciated as quickly as house prices as measured by major benchmark indices (SP500, Case-Shiller). The data does not appear to be consistent with a major rotation out of equities and into real estate (as happened after the dot-com bubble burst in the early 2000s). Indeed the relative performance of equities and residential real estate in 2021 looked a lot like the years before the pandemic when rental inflation was subdued and in the normal ranges.
During Covid, the US basically did ‘helicopter money’..free money to the masses distributed to basically everyone. This caused the inflation.
In Japan, two things:
1)during the past few decades, though there was QE, it wasn’t distributed to the masses like it was in the USA. Just it was spent on construction projects. The money went around a little but, but salaries remained stagnant / low. So no inflation
2)In Japan, salaries are basically controlled by corporate associations. This prevents job hopping and prevents upwards pressure on wages. Yes its illegal, but it happens all the time. It is just the way things are in Japan.
3)Over the last 20 years, iwidespread importation of temporary cheap labor or (trainee’s’ as they call them, but everyone knows that is a ruse) from neighboring poor Asian countries. Japanese companies use the usual ‘they do the jobs the Japanese ‘don’t want to do’ (at a much cheaper price of course ;-) ) same as you hear in the USA with respect to illegal aliens from central America..etc.. working in factories and manual jobs.
This pushes down salaries a lot too, as this practice is rampant these days in Japan.
Because of all this since there is no ‘free money’, and no increased salaries, so as a result, no inflation despite all the QE and ZIRP. The corporations are very rich though!
That explanation sounds plausible and seems to fit the data, thanks.
Taking your points one at a time:
1) So basically in great recession and aftermath (2009-2015):
ZIRP +QE + small well structured fiscal stimulus = low inflation.
Whereas during pandemic (2020-2021),
ZIRP + QE + excessive poorly structured fiscal stimulus = high inflation
If this is right, then the blame lies with Congress and the Presidents who designed and administered the fiscal stimulus in response to the pandemic.
2) This never applied to the US either in 2009-2019 or 2020-2021 so is likely not a factor.
3) US immigration (both legal and illegal) has been way below normal during the pandemic. This may be partly responsible for the labor shortage and escalating labor costs which are feeding into inflation generally, including rent inflation. This was due to the pandemic and restrictions imposed by governments in response to it. But this should have affected Japan too – surely the “widespread importation of temporary cheap labor” is down compared to pre-pandemic levels but it has not caused much inflation in Japan so this might not be a big factor.
To the last point:
1)Yes, however, the J govt made an exception to the entrance rules to allow the ‘trainees’ to keep coming in
2)The business associations still (mostly) control the salaries behind the scenes, so yes there were shortages, but salaries still did not go up. As well, since there wasn’t much free-money distributed to the masses like happened in the USA, the demand curve didn’t really shift much either.
Isn’t it obvious? Rents are rising because the cost of housing has skyrocketed the past decade, which is completely attributable to Federal Reserve interest rate repression.
Rent inflation has been in the normal range of 2-4% for the last decade despite the fact that ZIRP and massive QE began in 2009. It’s only in 2021, that rents have soared well outside the normal range.
So no it’s not obvious at all.
An investor buys a home at an inflated price today, with plans to rent it out. The investor has to charge a higher rent to cover the high mortgage payment and leave room for profit.
Even landlords who bought their properties at lower valuations in the past can smell the blood. They adjust their rents up ward to reflect the replacement cost of their properties. It’s not about covering their cost, it’s about maximizing their profits. They’ll charge the highest rent the market will accept, regardless of their cost structure.
Look at the home price charts. Prices skyrocketed across the country the past two years, on top of already elevated levels. This is why rents are rising faster now, versus several years ago.
In Canada rents doubled in the last 5 years. Home prices have risen 84 percent since 2015. Presently outside the province of Alberta there’s virtually nothing to rent.
“Look at the home price charts. Prices skyrocketed across the country the past two years, on top of already elevated levels. This is why rents are rising faster now, versus several years ago.”
Your opinions are simply not consistent with the facts.
Looking at the national Case-Shiller house price index, this showed 10%+ gains in 5 different years from 2000-2021.
In the first four of these (2004, 2005, 2013 and 2020), rents rose by their usual 2-4% just as they had done in other years like 2014, 2018 and 2019 when house prices were up less than 5%.
In 2004 and 2005 house price gains were in the 13-14% range nationally compared to 18-19% in 2021 and yet rents were up only 2-4% in 2004 and 2005 compared to 12-14% in 2021.
So sharply rising house prices do not generally cause or even correlate with sharply rising rents. In fact, when prices rise sharply while rents continue to rise slowly that is normally the tell-tale sign of a housing bubble.
Another thing to take into consideration is the fact that US landlords now carry a more palpable risk of not being paid their rents. Since government sponsored rent forbearance is now a thing, I’m sure landlords are pricing that in.
That, together with the free helicopter money that was given to all I’m sure had a massive impact.
Prices rose in the 70’s in spite of interest rate hikes.
Home price 1970 – $27,000.
Home price 1980 – $47,000
Home price 2020 – $329,000
Capitol Hill demanded more money than the IRS could collect. Bush fired many IRS auditors. People hated taxes, but loved government handouts.
I don’t understand.
Living expenses (like rent) are people’s largest expense in general. If it keeps going up like this, how do people still have money leftover to allow Apple to have record sales and profits? Record revenues of $123.94B in its most recent quarter.
Or for that matter, how do people still have money leftover to bid up new and used cars (2nd largest expenses in general) such that car prices have been spiking to “WTF” records?
Well, I don’t get it
Don’t you think maybe we could put it on credit
Don’t you think it can take control when I don’t let it
I get stupefied
In Canada all them money goes to rent and virtually no one under forty years old owns a car or will ever own a car. Car insurance rates was the main reason before car prices skyrocketed.
Somebody or corporation owns all these homes. Or at a minimum the ability to leverage the value. These have in my circle turned out to be HUGE piggy banks to be smashed and cashed. This would mean that a generation is “taking” from their future generations by cash out re-financing to 30 year mortgage at great rates. This is happening to many of the grand parents I know
Rents are going up in every US city 15-35%, gasoline is averaging $4 so filling up the SUV tanks now should be a little painful, beef is at $10/lb., but these same folks, the renters and the SUV owners and everyone else, are still buying and buying everything thing that the Chinese can deliver. Old cars, new cars, homes, iPhones, sales of everything are off the charts.
All the helicopter money has been spent, so have the 2020 savings but ‘consumers’ continue to spend like drunken sailors.
What accounts for this money disconnect?
People want to live in the style to which they have been accustomed, or even play like they can live in a higher style if advertisements egg them on. Credit cards are a great help in doing that kind of thing.
As much as I despise the Fed’s recklessly loose monetary policy and the impact it has on wealth inequality and asset price bubbles, I think it’s important to recognise that some other central banks are as bad, perhaps even worse. Ms Lagarde at the ECB brushed off calls to raise rates and even said that it would not act as “ruthlessly” as the Fed. And the Reserve Bank of Australia just kept interest rates at 0% and issued a very dovish statement saying it would be “patient” when monitoring inflation.
Interesting stuff, my dad is a farmer in Mexico and fertilizer has been off the charts this year as well as diesel and gasoline fuel for the tractors/pickups along with maintenance on tractors/machinery.
He runs a pretty tight mostly one man operation(himself), the inputs, seed/fertilizer/etc. He has been worried if he will even break even this crop season, he farms maize/corn. I’ve been telling him not to worry as either the price per ton will match his investment enough to break even or the government will step in and provide subsidies.
Either way if they don’t receive help a lot of independent farmers are going to suffer/go bankrupt and throw in the towel(maybe that’s the plan all along). This inflation is going to have a lot of impact all over the world, I suspect we will see much social instability and maybe even a revolution or two before this is over. Heck just check out that truck convoy in Canada.
Didn’t NAFTA contribute to the financial failure of many small farms in Mexico, leading to an increase in illegal migration to the US?
‘or the government will step in and provide subsidies.’
Is the US gov we’re talking about?
Sorry for the sarc and I wish yr dad well but competing against the highly subsidized US Ag and corn lobby seems tough. It also looks like stormy weather ahead and there could be probs for Mex finances with Fed tightening.
Serious question not a joke: everyone seems trying to get into cannabis.
There has been a huge shakeout of Canadian outfits that thought they’d get black market prices for a legal product: 2500 a lb., , but even 300 to 500 a pound beats corn. Can u grow legally in Mex like in Oregon?
Lots of dispensaries opening in the legal states like MA. And if it’s highly taxed in a state today, those products show up in illegal states where they pay the contraband premium willingly. A flower guy I used to work with has product from half a dozen states in dispensary packaging. Heads in old-law states are paying the herbtax in the product price because the quality is assured and it is more reliably available. This is a work in progress, I expect many thinly capitalized legal operators to fold as the novelty subsides and everyone gets stoned enough.
I think we need to go back to the drawing board. It should be discussed whether the Federal Reserve should exist in its current form.
Three huge financial bubbles have been blown by Federal Reserve policy since 1995. Wealth concentration is higher than its ever been. Could a financial system without an active Federal Reserve Board have done any worse than that?
You don’t think that banking deregulation in the late 90s had anything to do with this? The repeal of Glass-Stegall is a prime culprit
I’ve been meaning to finish reading a conservative Cato institute article that deeply dives into Glass-Steagall.
Title: “The Repeal of the Glass‐Steagall Act: Myth and Reality”
Main theme seems to be:
“In reality, Glass-Steagall was never an effective way of protecting banks from failure or the public from losses.”
The Glass Steagall Act was a protection against the ill effects of having banking, brokerage, and insurance companies all under the same roof.
This was an impediment to the financial industry.
Enter Robert Rubin, Goldman Sachs Chairman who came to the Treasury as Secretary to “serve the nation”. He spear headed the repeal of the Glass Steagall Act to the applause of Walls Street. Retiring from the Treasury he then got the big job at Citigroup reaping well over $100 million.
Citigroup was then bailed out by the Federal Government after things blew up in 2008.
So it took about 8 years …. from repeal to blow up. And some profited nicely from the entire process.
“Main theme seems to be:
“In reality, Glass-Steagall was never an effective way of protecting banks from failure or the public from losses.”
Well, is it coincidental or causal? It seemed to have worked until it was repealed. The timing is suggestive.
Yeah, I’d take anything the Cato Institute has to say about banking reform, or really anything related to business and finance with a fist-sized chunk of salt. Washington DC swamp trash.
And in irony:
On 29 August 1913, House Resolution 7837 was introduced by a Democrat from Virginia. His name was Carter Glass.
On 23 December 1913, it was signed into law by President Wilson. The Federal Reserve Act was then born.
“An Act to provide the establishment of Federal reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes.”
That line that you cited from Cato Institute is truly BS. During the entire history of Glass-Steagall, not a single bank got bailed out — they were allowed to fail and were then taken over (“resolved”) by the FDIC. This was possible because none of the banks were huge in today’s sense. The two largest bank resolutions by the FDIC were Continental Illinois and MBank (Texas). After the repeal of Glass-Steagall, banks became hedge funds and they bought each other out, and became nationwide octopuses, and a decade later, the bailouts of these monsters started.
Citi is a criminal organization using its facade as a commercial bank as front for its illegal operations. They should have been allowed to fail in 2008, broken up, and their senior management sent to jail.
Taylor Rule is a good step in the right direction.
Hard and firm guard rails.
GDP determines money supply expansion.
Inflation determines Fed Funds rate.
“Can you even imagine a 20% or 25% increase in rent, Mr. Chair Powell Sir, when your pay goes up a glorious 6%, what that would require of your belt-tightening strategies?”
How ironic that so much of the media frets over the possibility that there might be a “recession” if the Fed tightens. Wall Street and Silicon Valley might get one, but for many Americans, a recession is already in progress.
Fed Funds were 2% in 2018
A fair return on money is a characteristic of a good economy.
But for the Fed, MARKETS ARE THE ECONOMY
I think authoritarianism is more likely. Looks even probable at this point.
1) In Avisburg 1 BR rent is up 38.2% y/y. The craziest rent in one hundred years. A reaction to JP pump. For entertainment only :
2) QQQ BB #2 July 7 hi/ 8 lo 2021. On Mon the weekly bar jumped > BB #2. QQQ is drunk. AAPl to : $4T.
3) On Heinken QQQ weekly bar have shrunk, a tiny inside red bar. Jan low might be breached. QQQ got a warning sign.
4) QQQ hangover might reach May or Mar 2021 fractal zone.
5) The weekly cloud have a hump. The cloud is green, but it’s front end is tilting down. QQQ inside T & K. Chik below price.
6) QQQ Jan 10 have started the countdown. The move is fast.
7) AI : a support line coming from Sept 21 to Nov 2 lows 2020 was breached. QQQ is trying to move back up….to parallel lines from
Aug 31 2020 tilting fractal zone.
8) Nope !
Whoops, a lot of SC’s out there.
Bond 10 yr yields are moving sideways. If Fed is serious about 1. containing inflation, 2. raising rates thru this year and next, and 3. QT (reducing balance sheet), yield should be 2-3x higher already but it’s not.
This clearly means that no one believes Fed will follow through on these promises. Any comments?
It means that the Fed is still buying these bonds, and holds a huge pile of them, and there is no free bond market, and there won’t be a free bond market until the Fed has shed a big part of its bond holdings.
So in simpler words, Fed is lying and all talk of QT is BS.
Argument that Fed is following thru its original plan does not add up as they said they will be nimble.
Fed is losing whatsoever trust is left, every day.
I heard the next inflation report will be higher than 7%. The Fed hasn’t a prayer of catching up. I checked with my credit union today. The interest rate on a money market account is .30% if you have over $100K. If you have less, it’s .13%. All you savers out there are bankrolling all the speculation on Wall Street and making sure the top 1% and top 1/10th of 1% can continue to live in the life style they are accustomed to.
1) SSEC, Shanghai stock exchange, can leap like a tiger.
2) Tigers have no sweat to cool down therefor cannot run an ultra marathon.
3) SSEC weekly landed on it’s backbone, after chewing US for years.
4) BB #1 : Jan 5 2015 hi @3,404.33 // Feb 9 lo @3,049.11.
5) On Aug 24 2015 SPX plunged downhill, thanks to Shi Shin Ping.
6) SSEC close : 3,361.44.
7) SSEC weekly is not a tiger. It’s a Butterfly.
Bit worth a look over on CNBC: ‘The interest rate comet will hit US’
Some numbers. These are approx.
Interest paid to holders of US debt in 21: 413 billion.
This was at historic low of 1.5 % but still was 20% of taxes.
Debt in 2017 was 20 trillion. Now 30 trillion.
A key datum: In 2001 the interest rate paid on US debt was 5.4 %.
If that rate was paid today debt service cost would be 1.3 trillion.
That would not seem to be possible without drastic budget surgery that would have to amputate major limbs of social AND military expenditure.
So maybe the Fed is trapped, and our pleading for faster, much higher rates is like asking to be executed now instead of later.
Well, the Fed hasn’t yet actually raised any rates and is still buying tens of billions in bonds – but we are already being executed… by a CPI of 7%.
The Fed really has no choice but to respond soon. The only question is how powerful will their response be?
BTW, the real inflation on ground is 20% plus. FED is doing what they should be by their hidden agenda: To serve the rich and elite.
I am curious about mid term and the effect on inflation.
FED has option not to respond but keep jawboning. They’d be doing some action for show. If they are really serious, they’d have responded by now.
“your reckless monetary policies that made the wealthy far wealthier”
And yourself jerome. Yellen too.
Stealing from widows and orphans when you get down to that level.
there would be an easy fix for the rising rents. Average living space per capita in the US is nearly double of what we have here in Germeny (and in Germany it is already to much from an environmental aspect) Why not reduce that, move in with some friends, with parents, with kids and poof go the rents :=)
This is already happening at least in my geography. People are crammed in in smaller homes.
Here’s an example of communal housing costs from neighbors down the street. Check out the savings advantages from living in group homes. search
“Monthly Expenses divided among all seven people:
$2720 Mortgage. Because owner gets all the tax advantages of interest write-off, she pays all property tax and insurance costs.
Utilities, Gas- about $150 month in winter and $60 month in summer. Averages $130 month. Pre-solar panels, electricity was about $150 a month year round.
$150 water approximately
$90 Garbage and recycling.
$102 cable Internet access…cable soon to go up, we’re going to dump it and use neighbor’s wifi with their permission. [Not illegal. They chose to leave it open for others to share].
Analogy, is it illegal to use a neighbor’s porch-light that shines in your window? Or, we’ll let the neighbor piggyback on ours with a 50% shared payment of costs offered with low introductory rates.
$140 two land line shared phones. Will drop as some opt for own cell phone.
$228 community agriculture vegetable delivery (2 boxes)
$900 food for communal meals and sundry expenses.
Total monthly costs $4610 shared by 7 people= $658 per person per month or about $ 22 per day per person for all housing and essential food costs.”
I think the opposite has happened here in the US during the pandemic.
Because people have been spending so much more time in their homes due to remote working, school closures, gym closures etc., they have upsized their homes to accommodate home offices, homes gyms etc. so the square footage per person in US has likely gone up quite a bit during the pandemic. This is one of the factors behind the surging demand that has driven up both rents and house prices.
Once the pandemic ends, people might find that they are spending less time at home and all that extra heating, cooling, cleaning, upkeep isn’t worth the hassle, and they might want to downsize back to their old space that suited their pre-pandemic lifestyle well.
you can buy spy/qqq to hedge against the inflation. its at a discount now.
Or you cant wait a while and pick them up at a bigger discount.
I see references to the book, “Lords of Easy Money”.
Wolf, have you read it ?
A critical reviewer at Amazon, PWB, said this about the book. Do you agree?
“When the author is giving background information on member of the Fed, the writing is great. When he tries to explain financial terms or transactions, he gets out of his comfort zone and for those who are experts, it’s very frustrating to read and is riddled with mistakes.”
I don’t do book reviews anymore :-]
10 year still sitting at 1.78%. At least something is consistent.
The fed……just watched the movie…… A bridge too far….
The British in the movie remind me of the fed.
The British 1st airborne division lost 8000 men holding the Arnhem bridge waiting for the sluggish British tanks that stopped many times along the way to brew up tea and wait for the infantry…..all by the book. No initiative, no energy, no creativity, no ability to understand the situation and adapt.
Just bureaucratic stuffed up the a……..or in the case of the fed……make D Corleone look like a saint.
All your homes are belong to us!
When will Americans get it? The ruling elite is rich and is owned by those even richer. Left or right, it doesn’t matter, though at least the left pretends to care.
This is the system America claims is the best way to run a society. This is the propaganda we were all taught. “Everyone can get rich or be president. Study hard, work hard and you will succeed.”
Universal Health Care? Never, that’s communism. Never mind that American health care sucks and is the most expensive in the world.
Free education? Education is more lib-tards who hate ‘Murica. If we teach our people they will rise up and refuse to work at Waffle Hut for $4 an hour.
Minimum living wage? If you are poor, it’s your fault. It means you are lazy or inferior. And besides, if we gave poor people money they would waste it on drugs.
Military budget? As much as the next ten countries but that’s okay because we are fighting for Freedom! Except for in the Middle East, Africa, Latin America, Eastern Europe, South America and Asia.
but hey, at least you can watch the Kardashians.
Paging Mr. Henry George to the courtesy phone, Mr. Henry George to the courtesy phone, please …
“Progress and Poverty” — do yourself a favour and read it. Then figure out that network effects are at the root of so many other monopoly/oligopoly rentier sectors in our so-called “free market” society. It’s not a pretty picture …
My Equity Residential in Manhattan is renewing leases with a 40% to 48% increase. The Jesse’s are 20 to 25% over the pre-Covid 2019 levels. This is completely legal. Demand is through the roof so to speak. Rentals are getting multiple offers over asking.
In Park Slope Brooklyn townhouse buyers are putting in offers site un-visited.
Some people complain about “rentier” economy. The problem is, everything is “rentier” to some extent, not just housing.
Stock market is – do you think your growing stock portfolio matches the rise in sales? It hasn’t for a long time. You are taking money from those who come after you, just like those before took from you.
Your salary is a rent-seeking activity in good part. Without government printing money in excess, lots of us would not see a significant part of our paycheck. They call it “investment”. Who pays for this? Well, everyone through inflation, but mostly those without assets.
Education and health care are so obscinely overpriced, you know a good chunk of what you pay is for nothing, just taking advantage of fear tactics regarding your future, be it professionally or health-wise.
Owning rental properties is a way to preserve the value of your work, because if you kept money in the bank, inflation would eat it and your work was for nothing. Of course, at these prices, buying rentals is a bad business. You think rents are high? Trying buying a house and renting it out, even at these prices, and see losing money by the bucket every month.
I own rentals now and I was mad at landlords when I was young. Now, I am no longer young, and without this income I would be in a tough spot. If I didn’t have it, I would compete with you for work.
There is about 15 million small landlords in the U.S, who support themselves and their families with rent. They are not making bank every month, most are just getting by. If they didn’t have this, and had to work in order to make up for rental income, that would be many more millions of workers to compete with. That means wages would be lower for you, much lower.
Economy is not a simple thing. And perspectives from young and old differ, I get that. But we all go through life, and sooner and later, we all see every perspective there is.
But one thing that stands out, that really we should all agree on, is that the Federal Reserve is destroying us slowly, and now, suddenly.
And another thing we should agree on too, is that we are failing ourselves. Because technically, the government is us. And the government has been spending more than we make for many decades. We vote for them because they promise some freebies. And for what? In exchange, our future lives are poorer and poorer. Guess what? We’re in that poor life now – the gig is up.
So next time a politician promises you free food, health care, housing, education and what not, be very very suspicious! Time will come when you’ll pay back for all of it, with interest and penalty to boot, just for being gullible and voting for government con-men. That time is now.