Thread by @bopinion

🏠 The housing market is surging again.

But why is it upshifting during what should be the slowest time of the year? One answer is rising prices in the rental market trib.al/EJ4bwO9

Leases that are coming up for renewal now were signed at the end of 2020, before rents exploded higher.

That's renewing interest in home buying, which is essentially pulling the 2022 spring home buying season forward by several months trib.al/svEWcoh

If there's a silver lining for renters, it's that the cycle might relieve some of the upward pressure on rents that we've seen for most of 2021 trib.al/svEWcoh

By the end of September, it was reasonable to think the pandemic had pulled forward a lot of housing demand.

But high prices, supply chain constraints and a return to pre-Covid behavioral patterns were slowly bringing normality back to the housing market trib.al/svEWcoh

Mortgage purchase applications have picked up again. On a seasonally-adjusted basis, the end of November was the strongest we've seen since February.

Homebuilder stock prices are setting all-time highs. And inventory levels of homes for sale are plunging trib.al/svEWcoh

Renters with the best timing signed their one-year leases towards the end of 2020 when rents were at their lowest point.

But as those leases come up for renewal, some tenants are getting shocked by rent increases as much as 50% higher trib.al/svEWcoh

Some would rather try to buy a house than pay that much more in rent.

This should shift our thinking about the interplay between the home-buying and rental markets in the first half of 2022 — and what it might mean for inflation trib.al/svEWcoh

The run-up in the housing market in the early part of 2021 made renting look more attractive than buying.

Now, as annual leases come due at much higher rents, there's going to be renewed upward pressure on housing until rents fall back in line trib.al/svEWcoh

To the extent this latest shift toward buying leads to higher rental vacancy rates and slower rent growth, it's good news for inflation.

But that probably won't be seen until the middle of 2022 after all of the underpriced rental leases get renegotiated trib.al/svEWcoh