Inflation is not likely to be short-term, especially for consumers who rent their homes.
While some consumers are not feeling the pain of inflation, people who rent their homes are experiencing surges in rental payments. The increase in inflation has eliminated the wage gains that some hourly employees made recently. Some renters have already reported large increases in their monthly payments as they renew their contracts -- jumping by nearly a third in some cases, and more in areas that saw deeply discounted rates during the pandemic.
Spending more money on housing means consumers will be making cuts on other items such as food, going to restaurants and spending money at other small businesses, which will impact growth in the economy, wrote Bret Jensen in a recent Real Money column. “Rent increases are going to widen the discrepancy between the 'haves' and 'have nots' in our society,” he wrote.
Small business owners are also feeling the pinch as shipping fees and the costs for materials and supplies have also increased.
Consumers have expressed their views recently as the monthly consumer sentiment and confidence survey already report declines. Investment banks have also slashed their growth projections for the third quarter.
“On the other hand, apartment REITs should be sitting in the catbird seat as leases renew at much higher prices,” Jensen wrote. “This is one reason Camden Property Trust CPT is up more 60% over the past year and near all-time highs. They are a good lesson on why the current Fed and government policies are widening wealth inequality in this country, contrary to intentions. This rental inflation also is going to play a significant factor across the economy in coming quarters.”