STACEY VANEK SMITH, HOST:
A really weird thing happened in my apartment building this week - happened on Tuesday. I was on my way to work. And I went down to the lobby, and there was this little folding table set up in the lobby. And these two very perky people in matching polos were sitting there, and they were handing out free coffee and bagels to everybody.
CARDIFF GARCIA, HOST:
Were they cultists?
SMITH: I know, right? So I went up to them, and I was like, hey, what's going on here? And they said, oh, we're from the company that owns this apartment building, and we're just here to say hi and to see, you know, what your experience is like living in this building, if you have any complaints or concerns. And I was like, what is happening?
I mean, the company that owns my apartment building is enormous. They own a ton of buildings in New York, and they've always just been impossible to reach - like, a phone tree within a phone tree within an enigma. I mean, one time I had no water pressure for four days, and I left, like, 20 messages for 20 different people. Nobody called me back. Even my super said he couldn't get ahold of anybody in this company.
SMITH: And once for a whole week, our elevator was out. And there was just no explanation. They didn't care. And we just all had to take it.
GARCIA: Yeah, they don't have to care. You already signed on the dotted line.
SMITH: I know. And we just have to take it.
SMITH: We have no leverage.
GARCIA: Because every single year, there's more and more people moving into the city who will take that apartment...
SMITH: I know.
GARCIA: ...Off your hands on if you don't like it.
SMITH: And be grateful for the workout of taking the stairs.
GARCIA: Now, we should say New York is extreme in a whole bunch of ways. But this is actually true all over the country. I mean, since 2012, rent has been climbing a lot every year in cities all over the U.S., rising way faster than wages or the price of other non-rental things.
SMITH: Exactly. And so this bagel breakfast - it really threw me. I was like, what have you done? Is there lead in the water? Like, (laughter) it was really unsettling.
SMITH: I didn't feel - like, the whole way to work I was thinking about it. But then I saw something, and the whole bagel breakfast started to make sense. It was a report from Zillow, the real estate database. And what it said was that nationwide, rents were flat for the first time since 2012. This is THE INDICATOR FROM PLANET MONEY. I'm Stacey Vanek Smith.
GARCIA: And I'm Cardiff Garcia. Today on the show - rent. It's been rising for years and years, but finally it's not rising anymore. So we look at what's going on.
SMITH: Well, well, well, it looks like the economic tables have turned (laughter).
GARCIA: Yeah. And they're serving coffee.
SMITH: And, yeah, there's coffee and bagels on the table, so that's also a plus.
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GARCIA: Today's indicator is $1,440. That is the median rent in the U.S. according to Zillow. And it is unchanged from a year ago.
SMITH: What do you think of this? Is this a big deal, not a big deal?
SUSAN WACHTER: This is a big deal.
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 in the housing recovery. The housing recovery has been a story of supply chasing demand.
GARCIA: 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.
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.
WACHTER: And space has been really tight, and rents have been exceedingly high.
SMITH: 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: Oh, hopefully. Crossing my fingers.
SMITH: There might be hope for New Yorkers of finding a bedroom big enough for a bed.
SMITH: Let's not go crazy.
GARCIA: So this...
SMITH: Let's not go crazy.
GARCIA: Yeah, this seems to be a window for the little guy and for renters everywhere. What about everybody else?
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 as young households, new workers simply couldn't afford to move. They in many cases couldn't even afford to rent.
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.
SMITH: Sardine life.
GARCIA: 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.
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, getting people to where they're needed. The job market is booming, but it's been difficult to find places in the hot markets particularly. But now we see an easing. You can afford to live where the jobs are - in Seattle, in New York, in Los Angeles.
SMITH: Or, you know, get closer to affording them anyway.
GARCIA: If not quite affordable, at least less unaffordable.
SMITH: Less unaffordable is a big deal.
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 businesses, for those parts of the economy.
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: Yeah, cry me a river, OK?
GARCIA: But in all seriousness, the housing market is a big part of the economy, and it's really important that it be healthy.
SMITH: Is it possible that this is a bad sign, that rents flattening - and then it sounds like...
WACHTER: I don't see it. It could be.
WACHTER: You could see it. The explanation for rents flattening could be demand is slowing, and that could be a harbinger of a market with slowing demand...
WACHTER: ...Maybe even a harbinger of a slowing economy. No, this is not that. This is coming from the supply side. Rent demand is still up.
SMITH: Susan says more apartments will keep getting built, and there will keep being new people to fill them because younger renters who have been, for instance, living with their parents will start coming out of the woodwork to find a place. Also, people will start giving up the sardine life, and they'll go look for a place with more space, which they can suddenly afford.
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.
SMITH: And maybe a bedroom.
WACHTER: Vacancy rates have been at historic lows, too tight. And we finally see some daylight there.
GARCIA: Not just daylight but coffee and bagels.
SMITH: Coffee and bagels and crow (laughter). Sorry, I'm just - I have - you have to give me this moment to enjoy my tiny victory.
GARCIA: Our tiny victory.
SMITH: Our tiny victory, exactly. Maybe even not so tiny. I'll take some schmear on that bagel.
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