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Why New Rental Supply May Be Key to Lowering Mortgage Rates

Shelter inflation is taking the U.S. economy by storm. One way to lower housing costs is by building more apartments

May 18, 2023

Image: ArmedArmadilloStudio / stock.adobe.com

Housing completions are moving at a sluggish pace post-pandemic, but increased rental and for-sale supply could actually be key to fighting inflation and lowering mortgage rates, HousingWire reports. At 44.4%, shelter inflation is the biggest component of CPI inflation, and in order to bring down costs, builders will have to ramp up new construction or complete existing projects at a faster pace.

As we all know, we have a record number of apartments under construction. With rent inflation already cooling down, keeping the pressure on to fight inflation is a must because the Federal Reserve is obsessed with the 1970s inflation storyline.

I believe 1970s-style inflation can’t happen with the growth rate of rent inflation about to fade over the next year. Not only is the growth rate of shelter inflation cooling off, more supply is a punch in the gut against inflation.

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