I'm just going to lay out my interpretation of housing cost inflation here because I've seen a dozen threads over the past couple of weeks that have completely ignored what is clearly one of the biggest factors in what's going on: migrations.
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Notice anything similar about the places with the highest YoY rent inflation right now? They all saw very significant in-migration spikes during the pandemic. Most are beginning to cool off in terms of migrations now—the wave is over—but cost trends and supply responses both lag.
Notice anything similar about al the places with the slowest price recoveries? Well, they all saw a huge drop in net migrations over the pandemic and are only now beginning to recover. People got out of big expensive cities, lowering demand+prices, and got into cheap cities.
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And now, here's the metros that have shown any meaningful change in permits as a response to these migration trends. It's the Texas cities you would expect, plus Denver and the Philly metro area, surprisingly. I suspect Denver rents will cool fastest.
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If you're not talking about migrations, you are missing the key factor driving these highly geographic trends. It's true that prices are up everywhere, but they are *way* up in the places with highest in-migration, and up less in the places with out-migration. Important!
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Final point: rents are going to get hot in CPI over the next 6-12 months, and there's nothing the Fed can do about it. A bunch of people moved, altered the geographic supply-demand balance, and prices are going to respond absent highly elastic supply (lol) or rent regulations.
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The only things that will make prices go up less in these newly in-demand cities is more apartments and houses and rent regulations. Raising the interest rate would obviously not only do nothing to aid supply response, it will actually help to kill it. So, beware the hawks.
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