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Thursday, July 03, 2014

Since 1990, Real Rents Are Up 15% While Median Incomes Are Unchanged

Disposable income in America disappears

To the Fed’s Janet Yellen, runaway inflation – at least that which can not be “hedonised” away by the BLS like iPad and LCD TV prices – may be simply “noise”, which probably explains why she doesn’t rent.

But for the record number of Americans who are forced to rent as house prices are too high for the vast majority of the population while mortgage origination has tumbled to record lows (as banks can generate far higher returns on reserve by buying stocks than lending out said money), inflation is going from bad to worse. Case in point: as the WSJ shows, since 1990 asking rents – in real terms i.e., adjusted for inflation – have increased a whopping 15%. The change in median income over the same period? 0%.

This means that all else equal, the average American has 15% less disposable income after factoring rent compared to 24 years earlier.


1 comment:

Anonymous said...

What are real rents?