Housing

Dean Baker
The International Economy, 2016

Dean Baker
Truthout, December 12, 2016

October 28, 2016

October 28, 2016 (GDP Byte)

Dean Baker
Truthout, September 26, 2016

Dean Baker
The New York Times, August 2, 2016

Dean Baker
Truthout, July 18, 2016

The figure above compares the average 2015 rental vacancy rate with the percent increase in owner’s equivalent rent for 30 metropolitan areas. Although the relationship is imperfect, there is a clear trend to the data: higher vacancy rates are associated with lower inflation. The concept here is relatively simple: when a large number of rentals are vacant, rentiers must set prices relatively low in order to compete for potential renters.

This becomes clear when you look at specific metropolitan areas. The three areas with the highest vacancy rates also happened to have the three lowest inflation rates. Two areas in Ohio — Akron and Cincinnati — had 12.1 and 10.2 percent vacancy rates, respectively. Increases in rents were just 1.5 and 1.1 percent in those two areas, compared to the sample median of 3.4 percent. St. Louis, Missouri had a 9.7 percent vacancy rate — 3 percentage points above the median vacancy rate of 6.7 percent — and saw just a 2.0 percent increase in rental prices.

The LA Times ran a nice story on Friday about the Coronel family of Azusa, California, and how they were able to buy back their foreclosed home “for $280,000, far less than the $400,000-plus debt that had gone into default.” They had been able to stay in their home after their foreclosure because “Fannie Mae gave permission in 2010 for the Coronels to stay on in the Azusa house as renters.”

The article asked if Fannie Mae’s allowing this “indirect” principal reduction reflects a change in policy.  That’s because before the Coronel’s case, Fannie Mae and Freddie Mac required foreclosed homeowners to pay their entire outstanding mortgage balance before being able to repurchase their homes.  That’s while other buyers were able to pay the lower market price for the same property.

Dean Baker
November 20, 2014, The New York Times