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Behold: Rent Deflation
Good news for America's renters.
That's something I don't say very often.
Maybe I shouldn't be so
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Only investors holding multiple properties were net beneficiaries of the pandemic-era housing boom. Everyone else faced significant burdens—homeowners with tax increases often exceeding 30%, and renters with inflation-driven cost hikes of more than 20%.
As kind of a lark a few months ago I checked on rents in downtown KC in the newer buildings where the youngish “cavorters” hang out. A good two-BR with parking and amenities was going for $3500-4250/month. I threw up a little in my mouth and kissed the lark goodbye.
Yeah, I’ve rented two great places in two decent-sized metros over the last ~decade to have a downtown “escape” (so to speak). Not as big as KC, but pretty big. The last one was $3250/month. I mean, honestly, I thought it was a good deal. I thoroughly enjoyed having the option to just go hang out in the city for a week or two, and it was a situation where the owner was fine with someone not living in it most of the time because he previously rented it out as an Airbnb on college football weekends, and he liked having a steady monthly, all-year income versus sporadic reservations for big games, even though I think he was charging something ridiculous (~$8,000/ weekend) for marquee games. I didn’t renew it this year, but I did think about buying it. Until he told me that in addition to the $900k he wanted for the actual space, the two deeded parking places were $40k each.
If the US continues to experience low household formations (I recently read that the percentage of married Americans heading households dropped from 79% in 1949 to 47% in 2024), the desire to own a home will decrease.
Furthermore, out of every 100 children born globally in 2026, only 3 are forecast to be from North America (including Mexico).
Household formations is a big driver for wanting to purchase a home in which to raise a family and create wealth. Without household formations and children, it doesn’t seem like as exciting or worthwhile of a goal.
Seems like renting is a good idea for now.