If we keep demand constant, then yes, as inflation increases it is reasonable to expect that rents will increase too.
I’m not willing, however, to assume that demand will remain constant during the coming inflation.
I also want to point out that in previous inflations, WAGES were also inflating so the consumer could afford the inflated cost of goods and the increase in housing costs.
During the current round of inflation, we have wages that have been flat for several years (actually declining on an inflation adjusted basis) and I don’t see anything that will change that trend.
At some point the American consumer WILL be tapped out.
There IS a limit to how much debt a person can carry and to how much equity he can pull out of his house.
I’m assuming that the consumer is near that point now.
Consumer debt is at record highs and the percentage of income spent servicing debt is also at record highs. Retail sales are softening and the housing ATM (cash out refi’s) is nearly out of money.
Now we’re going to add more inflation on top of those factors. {And this inflation ought to be a doozy since the US Fed had to hide the M-3 numbers before they cranked up the printing presses. Look forward to gasoline at $5/gallon – bread at $5/loaf – etc, etc, etc.}
At some point, the consumer has to choose between eating and driving and other items. One of those other items is rent.
How can the consumer reduce rent? Downsize / downscale, double up with others in existing housing, move to less expensive part of the country, become homeless, move back in with the parents, etc.
All of the ways that the consumer can reduce his rent expenses result in REDUCED DEMAND FOR RENTAL HOUSING.
When demand declines prices decline.
Yes, I believe this time it WILL be different. (ie, inflation won’t be feeding into rents)
