A 'Turning Point' In The Housing Market
STEVE INSKEEP, HOST:
One of the toughest parts of living in a big city is finding an affordable place to live. That might be getting a bit easier. Here's Stacey Vanek Smith and Cardiff Garcia from NPR's economics podcast The Indicator.
STACEY VANEK SMITH, BYLINE: Rents in the U.S. have been on the rise for years until now. According to the real estate database Zillow, the median rent in the U.S. is $1,440. And that is unchanged from a year ago.
SUSAN WACHTER: This is a big deal.
VANEK SMITH: This is Susan Wachter. She's a professor of real estate and finance at Wharton. She says, yes, New York is extreme, but this story has been playing out all across the country.
WACHTER: This is a big deal because it signals a turning point. The housing recovery has been a story of supply chasing demand.
CARDIFF GARCIA, BYLINE: And supply was chasing demand in large part because of the housing crisis 10 years ago. For a long time after the crisis, construction was just dead. Other parts of the economy, though, started gradually recovering, you know, like the tech sector and retail industry. And people started wanting to move again and get nicer places, but building and construction just lagged behind.
VANEK SMITH: As a result, there weren't enough apartments to meet demand. And the prices of the rentals that were available just kept going up. The construction industry did eventually kick into gear. And building has been happening like crazy in many parts of the country. Still, there was such a backlog of people wanting apartments - even though new places were being built, there still weren't enough places to meet all of the demand. So rents just kept climbing and climbing.
GARCIA: Until now. The supply of housing seems to finally be catching up with demand.
WACHTER: Or right now if you need to rent, you're going to be renting for less than last year. So that's a good thing. And if you wait a bit, rents are probably going to fall even farther.
GARCIA: This seems to be a window for the little guy. What about everybody else?
VANEK SMITH: For the economy as a whole, good or bad?
WACHTER: Well, I think this is actually good for the economy because we've had a real hit on mobility.
GARCIA: Susan says a lot of people were dealing with unaffordable rents in a few different ways, you know, like they'd split a place with a bunch of people.
VANEK SMITH: Sardine life.
GARCIA: (Laughter) Yeah, or they'd stay with family or with their parents longer or just not taking a job in the places where the jobs were because the apartment rents were so high.
VANEK SMITH: Now that rental prices are flattening, says Susan, it means people will have more options. They can be more mobile.
WACHTER: Mobility to where the new jobs are is what drives the economy. The job market is booming, but it's been difficult to find places in the hot markets particularly.
VANEK SMITH: Susan says a lot of companies have been struggling to find workers to fill all their jobs, which meant that those companies could not grow as fast as they wanted to. Lower rent, she says, will help companies and cities and small businesses.
GARCIA: Also if people are spending less on rent, it means they have more money to spend on other things, like eating out or going to the movies or buying clothes. And that's obviously good for those parts of the economy.
VANEK SMITH: Unless you are a landlord. Then you are not so excited about this. Suddenly, it's taking longer to rent a place. People are pickier. You can't raise the rent every year. Maybe you even have to lower the rent.
GARCIA: Susan says vacancy rates have been around 4 percent across the country, and that is really, really low. But now, they're starting to rise. That's still totally fine for landlords. And for the rest of us, at last a little breathing room.
VANEK SMITH: And maybe a bedroom. Stacey Vanek Smith.
GARCIA: And Cardiff Garcia. NPR News.
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