Wage growth is getting ‘wiped away by rising rents’ and inflation

Wage growth is getting ‘wiped away by rising rents’ and inflation: Economist

Lawrence Yun, National Association of Realtors Chief Economist and Senior Vice President of Research, sits down with Yahoo Finance to talk about the state of the housing market amid the Fed's interest rate hikes, rental demands, younger workers' wage growth, and mortgage rates.

Wage growth is getting ‘wiped away by rising rents’ and inflation: Economist
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Wage growth is getting ‘wiped away by rising rents’ and inflation: Economist

Wed, September 14, 2022, 6:12 AM

Video Transcript

[AUDIO LOGO]

- Today's CPI report showed rents rose 0.7% in August from July, marking the fastest monthly gain since January 1991. Annual rate inflation rising 6.7%, that the highest rate in almost 40 years.

Let's talk more about rents and the housing sector with Lawrence Yun, the National Association of Realtors chief economist, senior vice president of research. Lawrence, nice to see you. How big a problem is that dramatic surge in rent for the housing sector, for the Fed, and for inflation?

LAWRENCE YUN: Well, we had had housing shortage before the pandemic, and then housing shortage worsened during the pandemic as people went rampant in terms of purchasing properties. But with the sharp rise in mortgage rate from the beginning of this year, we have seen home sales come down.

But what that means is that people who want to purchase a home, they can no longer purchase, so now they are becoming renters. So the rental demand has been rising from a sharp rise in mortgage rate along with continuing job creation. So I think that we have several additional months of further rise in rents.

- So then, given, obviously, now, the difference in purchasing power with inflation still being so persistent, what does this mean regionally? Because obviously it's not a monolith when you look at the real estate sector and how it's performing across the country. What are you seeing regionally?

LAWRENCE YUN: Well, you know, regionally, the Midwest market is the most affordable. So someone who has the flexibility to move, the Midwest offers buying a decent sized home at affordable prices. The Southern states, especially Florida, is still super hot. Rents are rising very fast. Home prices are rising. Even with a reduction in home sales, prices continue to rise.

Wage growth is getting ‘wiped away by rising rents’ and inflation: Economist