Thursday, July 19, 2012

Rent increases pushing up housing starts but will also impact CPI

The only positive news coming out of the US economy seems to be the housing market. Housing starts had a nice increase in spite of a slowdown across most sectors.

US housing starts

Here are some facts to consider:

1. According to some analysts, housing starts would need to double to keep up with the demand from long-term US demographics.

2. Because of the demographics, rising rents in some areas are encouraging both renters and landlords into buying property, pushing up housing starts.

3. Residential (apartment) rents in the US have increased 3.5% YoY according to Reis. This is considerably higher than the current overall CPI. Rental increases take some six months to feed through the official CPI number. Expect a pop in the CPI (from the rental market as well as rising commodity prices) in the coming months.
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