Years of staggering rent inflation are taking a toll: Renters are pulling back their spending on non-rent stuff.
What's happening: Spending growth among renters and homeowners used to largely move together. But starting in early 2022, a gap emerged — renters' spending growth started lagging that of owners, per Bank of America's internal card spending data.
- This year, renters' spending growth has gone negative. In June, it was down 1.4% from a year ago.
Why it matters: It's another way of showing how homeowners who locked in low-rate mortgages before the Fed started hiking rates last year are effectively immune to a major slice of U.S. inflation — housing costs.
- More than 60% of mortgage holders are sitting on rates below 4%.
Details: The spending gap emerged right around the time that rent inflation really took off — the consumer price index for rent surpassed its 2018-2019 average in early 2022, according to a report by Bank of America Institute.
- "Renters' spending appears to have been sapped by rent inflation, while homeowners have been somewhat insulated from higher interest rates so far," the report noted.
What to watch: That insulation only benefits homeowners until they have to sell. As more home buyers take on higher mortgage costs — and rent inflation moderates, potentially — that gap could narrow again, BofA Institute notes in the report.