Author: Andrew Geoffrey
2022 may be one of the worst years for tenants as rent prices are skyrocketing at an alarming rate and made worse by the rising inflation in the country.
Whether the situation will improve anytime soon depends on multiple factors, and we can only wait to see.
Let us discuss more on the rising rent prices and how their effect on Americans
Skyrocketing Rents Hurt Tenants As Inflation Rises
In some parts of the country, rent prices are skyrocketing as high as 70%, which may be due to an increase in demand combined with a shortage of supply in residential homes.
This phenomenon is having the most effect on tenants with low income who are at risk of being driven away by the current situation of the market.
As rent prices increase, middle-income renters gradually get pushed out of their current apartments, leading them to compete and push out lower-income renters from their apartments.
Although not apparent, rents have become a significant part of the inflation struggle in the U.S.
In June 2022, rent prices had risen by 14.1% compared to the previous year. At some point in 2022, the prices skyrocketed to 17.8%.
The sharp rise in rents coincides with x inflation on several other consumer goods.
In June, the CPI (consumer price index) was at 9.1%, which is significantly higher than the 8.6% of the previous month. The Bureau of Labor Statistics says this is the highes12-month rise since December of 1981.
The hike in prices increases the landlords’ operating costs, leading these landlords to pass some of the burdens to tenants.
As inflation keeps rising, landlords might keep increasing rents, which adds to the price increases on essential products and services.
To counter inflation, the Federal Reserve has been hiking interest rates, which is supposed to increase the cost of borrowing for businesses and consumers.
This move is expected to bring down prices by slowing the economy down and eventually reduce the prices of some goods in the market.
Nevertheless, the results produced by rate hikes have been different in rent prices. When consumer spending reduces, demand will reduce and cause prices to fall.
Also, we observed the rate hikes have caused mortgage rates to increase, keeping potential homebuyers within the rental market until a decent home buying opportunity opens up to maintain demand and limit the decline of prices.
The beneficial effects of rate hikes are pretty clear for most goods as the increase in rates regulates demand and the economy in a scheme to control price growth. But it doesn’t seem to be the exact case with rental prices.
However, analysts expect the alarming rise in rents to cool down for the rest of 2022. This may not result in a sharp decline in rents, but provide a bit of relief from the significant increase in prices.
Hopefully, the sky-high rent prices will cool down before the year runs out. But for now, tenants will have to deal with rising rent prices and the general effects of inflation.