You’d think a crash in real estate prices would reduce rents. You’d be wrong.
As more people leave their homes and abandon their dream of owning their home, more such people are forced to rent.
Rising rents are fueling inflation and diminishing the room the Federal Reserve has to stimulate the economy.
The Obama administration is considering renting out some of the hundreds of thousands of foreclosed homes on the hands of Fannie Mae and Freddie Mac. That could reduce renting costs if they are able to act on the plan.
Shelter costs in the U.S. — a category that includes houses, apartments, hotels and college dorms — rose at an annualized rate of 2.7 percent in the three months through July, the Labor Department reported Thursday. That’s the fastest rate of growth since January 2008, just after the recession began (see chart).
The trend reflects increasing demand for rentals as foreclosures force some people out of the ownership market, tight-fisted banks prevent others from getting mortgage loans, and falling housing prices make homes less attractive as an investment. As of June, the U.S. rental vacancy rate stood at 9.2 percent, the lowest level since 2002.