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Although our politicians and policymakers insist that the runaway inflation ravaging our economy is merely “transitory”, millions of Americans will soon be living under a bridge as both home prices and rents are now skyrocketing at breakneck speed. At the rate house prices are climbing right now, it won’t take long before most part of the American population gets completely priced out of the market. Even the record-low mortgage rates are not being effective in helping Americans to become homeowners anymore, which means they will be doomed to pay inflated prices for rent for years if not decades to come. To make things worse, as the Wall Street Journal reported recently, would-be home buyers that have been priced out of the housing market this year are finding little consolation when they turn to the rental market. That’s because rents are soaring and hitting record-breaking levels as well.
Real-estate data company Yardi Matrix found that asking rents for houses jumped nearly 13% for the year to date through July, the highest annual increase in the past five years. Since the beginning of 2021, the national median rent went up by a shocking 13.8%. As a comparison, in the pre-outbreak years from 2017-2019, rent price growth from January to August averaged just 3.6%. Given that rents are rising virtually everywhere, even small and mid-sized markets are recording an unprecedented boom. For example, in Boise, Idaho, rents have shot up by 39 percent since March 2020. This year, rent growth is largely outpacing pre-outbreak averages in 98 of the nation’s 100 largest cities. One of the most remarkable aspects of the current market is the fact that, unlike previous price bubbles, this time around the price increase is has been consistent, with not a single downward turn over the past 9 months. This is a big change from 2020 when rents sharply dropped in expensive markets while growing aggressively in more affordable ones. In 2021, the boom is affecting every major market in the country — rents are rising across the board.
To add insult to injury, while middle-class Americans become increasingly poorer as they are forced to spend a larger share of their disposable income on rent and other living expenses, Wall Street is, of course, getting remarkably richer with this crisis. Several wealthy investors and Wall Street firms have been buying entire neighborhoods just so that they can rent the housing units at a big, big profit. The timing is also perfect for Wall Street players since the eviction moratorium has expired and the supply of available rental units is about to go up as millions of Americans get kicked out of their homes. Throughout the past year, corporate landlords were unable to evict non-paying tenants, which left them with less supply to offer those who can actually pay. To make up for their losses, they have been raising rents on every property they can, knowing that demand in the market will support the increases.
Now that the Supreme Court struck down the federal eviction moratorium for good, millions upon millions of Americans lost the only social safety net keeping a roof above their heads. A new analysis released by Goldman Sachs on Sunday suggested that without congressional action or faster disbursement of rental assistance, about 750,000 households will face eviction by the end of the year. The analysis also highlighted that due to the strength of the housing and rental market, landlords will try to evict tenants who are delinquent on rent as fast as they possibly can. The rate of evictions could be alarmingly high in cities hardest hit by the health crisis, considering apartment markets are actually tighter in those cities. Goldman also noted that an eviction episode of this magnitude will lead to a drag on consumption and job growth all across the economy, but that will be nothing compared to the implications it will have on new virus infections and public health.
On the other hand, institutional landlords are arguing that there’s a ‘silver lining’ in throwing hundreds of thousands of people out in the street: The mass evictions would allegedly ease the imbalances created by the housing shortage since several units would be brought back into the market. On Twitter, Darrell Owens, a housing policy analyst at California YIMBY, wrote: “750,000 households don’t just magically disappear. So why would aggregate vacancies increase under stagnant housing? Because the plan is to make them homeless”. Sadly, he’s right. Housing in the U.S. is about to become completely unaffordable to anyone outside of the top 1%. This means that the original American Dream of owning a home has faded away and turned into a nightmare scenario for millions of Americans.”