Members of Gen Z and Millenials are seeing their personal inflation rates cool as rent prices moderate.
These demographics have lower personal inflation rates than the overall population for the first time in two years, according to a new CPI analysis from Redfin.
Gen Zers and Millennials who signed a new lease in December saw the cost of their goods and services rise 5.6% and 6.1%, respectively, compared to a 6.5% increase for the average American.
Gen Zers overall now have a lower personal inflation rate than the U.S. population for the first time since the beginning of 2021.
Inflation was heavily impacted by shelter costs, which make up around a third of the value of goods and services included in overall inflation measures. As rents soared in 2022, it became cheaper to buy than rent in some cities.
Young people who signed a new lease as rents began cooling are benefitting more quickly from cooling inflation than the typical American, thanks to declining rent increases.
The median U.S. asking rent increased 4.8% YOY in December, the smallest jump in more than a year and down from 16% in July 2022.
“It seems that an increase in supply helped relieve the pricing pressure on rental units around the country – and that’s exactly what had to happen,” Ken H. Johnson, Ph.D., an economist in FAU’s College of Business, noted.
Even as single-family construction has faced challenges, multifamily projects are moving forward at their highest levels since the 1980s.
“You know, we’re going to see 40-year highs in new apartment supply in 2023,” said Jay Parsons, an economist with RealPage, told Marketplace. “And that wave is going to last into 2024.”
Lower personal inflation gives renters access to more of their income, which they can save for personal gain, such as a down payment on a home.
“For those who are on the fence about continuing to rent or buying their first home, waiting a few months before locking in a new lease could be worthwhile,” said Redfin Senior Economist Sheharyar Bokhari.
“If mortgage rates and home prices continue dropping from their peak, entering the housing market will be more affordable than it is today. Depending on individual circumstances, that could shift the math on whether renting or buying makes more financial sense.”
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