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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