Recession is here, but the Fed will not be able to do as much recession fighting as many people expect.

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Median Rent from ApartmentList.Com

ApartmentList.Com reports Rents 1.3 Percent in June.

Our national index rose by 1.3 percent over the course of June, consistent with last month’s increase. So far this year, rents are growing more slowly than they did in 2021, but faster than they did in the years immediately preceding the pandemic. Over the first half of 2022, rents have increased by a total of 5.4 percent, compared to an increase of 8.8 percent over the same months of 2021. Year-over-year rent growth currently stands at a staggering 14.1 percent, but has been trending down from a peak of 17.8 percent at the start of the year.

Rents are still rising month-over-month but at a declining pace year-over-year. 

National Rent Price, OER, Rent of Primary Residence

Rent data from ApartmentList.Com, chart by Mish

Chart Notes

• The National Rent Price is from ApartmentList.Com 
• OER stands for Owners' Equivalent Rent, the mythical price one would pay to rent one's own house from oneself, unfurnished and without utilities.
• Rent of Primary residence is just what it sound like. That number and OER are from the BLS.
• The National Rent price is as of June, BLS data is as of May.

Apartment List Stated Methodology

• We calculate growth rates using a same-unit analysis similar to Case-Shiller’s approach, comparing only units for which we observe transactions in multiple time periods to provide an accurate picture of rent growth that controls for compositional changes in the available inventory.
• We capture repeat transactions - when a single apartment gets rented more than once over time - and check whether the transacted rent price has changed between those transactions
• Rent estimates reflect prices paid by renters, not list prices for units that remain vacant.

Inflation Pressures in Rent and Energy Compound the Fed's Recession Woes

The National Rent price reflects year-over-year changes, but in reality, people pay the same amount of rent for 12 months then there is one big price jump 13 months later.

That accounts for the BLS lag.

Year-over-year the trend is lower prices, but that does not help the Fed because of BLS CPI lags.

Percent of CPI 

Rent of Primary Residence and OER combined are over 31 percent of the CPI. 

The price of gas is falling as expected in this corner, but that is not going to help the Fed much in June as the average price was close to $5.00 a gallon.

Given the hefty combined weight of Rent in the CPI, this lagging effect may keep inflation stubbornly high for some time. 

Heaven help the Fed if prices rise year-over-year as much as ApartmentList states.

Recession Has Clearly Started

As noted on July 1, GDPNow Forecast Plunges to -2.1 Percent, a Recession Has Clearly Started

Given inflation pressures and stubbornly high home prices, don't expect Fed Chair Jerome Powell to put on a white hat and come out blazing with rate cuts and more QE.

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