Median rents continue to decline – The Daily Tearsheet

Vital Statistics:

Stocks are higher as we begin the FOMC meeting. Bonds and MBS are flat.

Realtor.com reports that median rents declined YOY for the 23rd straight month. Median rents are about 2.7% below their 2022 peak, so rents have basically flatlined. Rents have increased on a YTD basis, however that might be nothing more than normal seasonality. The current median asking rent is $1,711.

Renting is cheaper than buying in 49 out of 50 MSAs with an average savings of $908 a month. Which was the only MSA that buying is cheaper? Pittsburgh. The worst MSA? Austin, where it costs $1,467 to rent a starter home and $3,150 to buy one.

More evidence of an unaffordable housing market: the homeownership rate has fallen to the lowest level since 2019. The drop affected all age groups, and hit the 45-54 age group the hardest.

Possible dark clouds for the employment market: AI is replacing entry-level college graduate jobs, leading to a pretty shaky market for new grads. Beginning in 2020, the proportion of college graduates who have professional level jobs that require a degree has continued to fall. The unemployment rate for new college graduates is about 6.6%, much lower than the unemployment rate for the country overall. That said, I suspect the unemployment rate overall is much higher due to 6 month threshold for unemployment.

Every major productivity-enhancing technology (think robotics, the personal computer, the internet) was feared to eliminate whole swaths of workers, and that never really materialized, except in manufacturing. AI might do to white collar work what robotics did to blue collar work, or it might create a slew of new jobs that we can’t imagine yet.

That said, in the near term, AI is expected to be a highly disinflationary force in the services market, which will help on the inflation front.