Eight years later, the Housing bubble morphs into Rent bubble

Prior to the bursting of the artificially created Housing bubble in 2007, home prices had skyrocketed due to cheap money, low interest rates, and government policies that mandated banks lend to people who couldn’t afford it.  And with many families remaining cautious or unable to purchase a home after millions of Americans had lost theirs during the run of foreclosures following 2008, renting in the U.S. has never been higher since the 1960’s.

But with so much property once again being overpriced thanks to the Fed’s saturation of money coupled with historically low interest rates, the rise of a new bubble has taken shape, only this time it is not in regards to home ownership, but instead it is in the cost of rents.

Welcome to the new rent bubble, and the re-emergence of the Rentier Class.

Living in the USA has never been less affordable, according to Zillow.

Americans living in rentals spent almost a third of their incomes on housing in the second quarter, the highest share in recent history.

Rental affordability has steadily worsened, according to a new report from Zillow, which tracked data going back to 1979. A renter making the median income in the U.S. spent 30.2 percent of her income on a median-priced apartment in the second quarter, compared with 29.5 percent a year earlier. The long-term average, from 1985 to 1999, was 24.4 percent.

Rental affordability worsened from a year earlier in 28 of the 35 largest metropolitan areas covered by Zillow. Rents were least affordable in Los Angeles, where residents devoted 49 percent of monthly income to rent. The share in San Francisco was 47 percent, 45 percent in Miami, and 41 percent in the New York metro area. – David Stockman’s Contra Corner

rent to income

When a government or central bank creates monetary policies contrary to the mechanisms of a free market, the inevitable reaction is always a bubble in some form or another, and inflation in areas that directly affect the common man and consumer.  And while these same agencies work hard to mask and obfuscate how much inflation truly affects people in their everyday lives, the fact of the matter is prices always rise when a money supply increases no matter how much they try to halt the velocity of that money.

2015 is revealing itself to be the year of a return to the days of Stagflation, only on a much greater scale since wages have failed to keep up with the true cost of living increases.  And this time, there will be no savior in the form of Paul Volker to adjust interest rates to flush out that excess money, which will eventually lead to a rent bubble so great that it will leave even more people homeless, and very few that will soon be able to afford to have a decent place to live.

Kenneth Schortgen Jr is a writer for Secretsofthefed.comExaminer.com, Roguemoney.net, and To the Death Media, and hosts the popular web blog, The Daily Economist. Ken can also be heard Wednesday afternoons giving an weekly economic report on the Angel Clark radio show.