May 18, 2006
The Squeeze
Rents a Key Driver of Inflation
Housing increases account for nearly half the rise in the core consumer price index.
By Lisa Girion and Annette Haddad, Times Staff Writers
May 18, 2006
Like an uninvited drunken uncle, higher consumer inflation crashed the economy's growth party Wednesday. But it wasn't just higher energy prices that caused concern.Rising rents and higher prices for a wide variety of consumer goods, including prescription drugs, swimsuits and school books, were key factors behind a higher-than-expected 0.6% increase in consumer prices in April.
The inflation news, reported by the Labor Department, sparked a stock market sell-off amid fears that it would lead to higher interest rates and an economic slowdown.
Higher rents in particular were worrisome, accounting for nearly half the surprisingly high 0.3% increase in the core consumer price index, which excludes energy and food costs. Rents have been increasing as many people are priced out of the sky-high home purchase market.
Scott Sanders was among many Southland residents facing soaring rents. He was paying $1,550 in monthly rent for a two-bedroom apartment in a trendy West Los Angeles neighborhood near the Grove shopping center. But it was too good to last.
One by one, the building's apartments were getting face-lifts followed by substantial rent increases. Sanders figured his rent would nearly double when the renovation effort got to his door. So he got out.
"I could see the writing on the wall," said Sanders, a liquor license consultant who is now renting part of a large home from a friend.
"It was either move now or move later."
Many of these rent increases and other higher prices could stick around because they aren't dependent on energy and don't necessarily respond to Federal Reserve interest rate hikes, economists said.
The spread of price hikes to nonenergy areas "suggests that inflation is now a greater risk for the economy," said Lynn Reaser, an economist for Bank of America in Boston.
More pain for the working class. Wages ain't going up.
Posted by Melanie at May 18, 2006 10:12 AMAnd more fuel used, since eventually you'll have to move out of the area in which you can find a job in order to find a place in which you can afford to live.
The Eastside suburbs are playing with taking school district lands for future schools and building housing specifically for city employees, because its getting to the point where no teachers, firefighters or police live where they work in these suburbs. And without that connection to the community, quality of service eventually suffers if you are perceived, and others perceive of you, as nothing more than jannisaries.
