Inflation Alert: Soaring Apartment Rents

Trulia reported this week that apartment rents nationwide are up nearly 6% in the last year.

Buried in the last paragraph of a Bloomberg story about the cooling housing market are details about inflation in the rental market.  Three large California cities have seen ten percent hikes in housing costs in the last twelve months with San Francisco leading the way.

According to Trulia the median two-bedroom in San Francisco costs $3,550 per month.  Rental costs city wide rose over 15% since last year.

 

Inflation Rears It's Nasty Head

Speaking of a housing bubble.  Prices of homes in England increased nearly 4% last month.

But don't worry the "fears of a housing bubble are misplaced" says Christopher Hope of The Telegraph:

A breakdown suggested fears of a nation-wide housing bubble are misplaced, with London leading the way with a 16.3 per cent year-on-year increase, compared with a more modest 4.9 per cent in the rest of the country.

So according to the story a 5% annual increase in rent is modest.  Is the average wage earner garnering 5% annual salary increases to keep up with inflation?  Not likely.    

Full story from The Telegraph.

Another Housing Bubble?!?!

It seems that bankers and home buyers the world over have already forgotten about last decade's housing bubble.  Loose lending standards, low down payment requirements and really cheap credit have contributed to another housing boom.

From The Sydney Morning Herald:

Nominal house prices have risen 29 per cent in Australia, 28 per cent in Canada and 61 per cent in Israel, form the first quarter of 2009 to now, according to Goldman Sachs.

We are talking about returns of 6%+ per year from housing during The Great Recession.

Let's remember what a house actually is, a depreciating asset that costs money to maintain.  It should not increase in value unless the land it sits on becomes more desirable.  Increased appeal of land is logical in some cases (i.e. an oil discovery) but land values should remain very stable over centuries.

Things like this shouldn't occur...  

Boom > Bust (from OfTwoMinds.com)

  
So what will be the conclusion to this most recent housing bubble?