Rental vacancy data shows progress that can keep mortgage rates lower

"Since late 2022 I've believed that the Federal Reserve really wanted to attack the labor supply and make sure wage growth falls to a level they feel comfortable with. Rule of thumb: if wage growth is 3% and productivity is 1%, the 2% inflation target can be met. Regardless of what AI can do for productivity, the Fed just feels better once wage growth is at 3% or below and it's currently at 3.7% year over year using the last BLS jobs report data."

"The rise in inventory and vacancy data has led home-price data to cool from its very unhealthy growth from 2020 to mid-2022, to a more healthy backdrop, without showing any signs of massively stressed sellers. When you look at total active listings in the U.S., per the NAR data, you can see the all-time low here was 860,000 during Covid, now currently at 1.22 million, but normal active listings are really 2-2.5 million."

"Today, the rental vacancy data is standing at 7.2% when the lowest during COVID was 5.6%. Rent inflation took off during Covid, sending the core CPI inflation data year over year to a high of 6.6%, but it is currently at 2.5%."

Rental vacancy rates have risen to 7.2%, up from the 5.6% low during COVID, contributing to cooling rent inflation from a 6.6% peak to 2.5% currently. The Federal Reserve has prioritized reducing wage growth to 3% or below, believing this level combined with productivity gains supports the 2% inflation target. Wage growth currently stands at 3.7% year-over-year. Homeowner vacancy improved to 1.2% from COVID's 0.07% low, reflecting healthy homeowner conditions. Active housing listings increased to 1.22 million from COVID's 860,000 low, though still below the normal 2-2.5 million range. This inventory gap differs significantly from 2008's 3.8 million listings, indicating current conditions lack the severe financial distress that preceded the previous recession.

Read at www.housingwire.com