Slowing Market, Swelling Rental Prices

The nation's housing market is cooling down as construction activity has decreased, inventory remains tight, and affordability, while loosening due to lower interest rates, is still a headwind. Economists say rental prices may rise over the next year as a result.

Pantheon Macroeconomics estimates more than 4 percent annual growth in rental prices by 2020. The economic research consultancy's chief economist Ian Shepherdson tells Business Insider, "The flat trend in multi-family permits is a key part of our view that the rate of increase of CPI rents is set to rise this year." Recent Commerce Department data show that multi-family construction increased in February, but the number of permits issued was lower than in January. Housing starts were down nearly 9 percent in February.

With the unemployment rate at historic lows and signs of upward pressure on wages, the housing market has been a soft spot in an otherwise humming economy.

A growing disconnect between the two could muddle the outlook for consumers and further delay investment, according to Jonathan Miller, the chief executive of Miller Samuel, a real-estate and appraisal firm. "Consumers are still looking to buy, but they're waiting until they're more comfortable," he said. "People have a lot to process, and the sense of urgency to buy hasn't been there in more than a year."

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