Todd David, executive director of Housing Action Coalition, a charity responsible for housing policy in San Francisco, said all signs indicate that rent costs in the Bay Area are picking up after the pandemic-induced downturn.

“After one year, if we don’t increase a lot of supply, there is no sign that we will increase… The rental price in San Francisco is [going to be] It’s hitting a record high again,” he said. “The trend is upward. ”

Housing costs are sleeping giants, and it may break the scale of the growing debate U.S. inflationThey are quickly becoming key indicators for Fed officials, within the Biden administration, and private economists.

So far this year, the housing component of the consumer price index has seen a small increase compared with the soaring costs of such projects. Second-hand car, Air tickets and energy.

However, housing costs have been rising slightly, with a year-on-year increase of 2.6% in June and 1.5% in February.

If housing prices remain relatively under control, they may help ensure that inflation is under control, thus validating the Fed and the White House’s expectations that price pressures will fade.

However, if housing prices continue to grow at a small but steady rate in the context of rising housing prices in many cities, it may indicate that high inflation will last longer than expected.

Housing costs account for about one-third of the overall CPI, including rental prices and the so-called “owner’s equivalent rent”, which is the estimated cost of the house rented by the owner.

“We calculate that the market will not be fully balanced until 2023 or 2024. So I’m not sure if rent increases are particularly short-lived,” said Ali Wolf, chief economist of Zonda, a real estate market consulting group.

She added: “Assuming that the economy continues to improve and we continue to see job growth data improve, I do believe that there will continue to be some upward pressure on rents.”

So far, the increase in rental costs in the economy has not been particularly large, and it has not even recovered to the level of easily higher than 3% before the pandemic.

But if it continues, or even accelerates, it may cause major problems for the Fed, because the increase in costs will be embedded in the lease contract, making it difficult to reverse. Rising rents may also affect inflation expectations, which is a key factor in monetary policy formulation.

The Fed’s preferred measure of inflation, the Personal Consumption Expenditure Index, does not measure housing costs like the CPI, but the central bank may find that any increase in housing spending is increasingly difficult to ignore.

Tim Duy, a professor at the University of Oregon and chief economist at SGH Macro Advisors, wrote in a report this week: “People don’t buy a used car every month, and many people buy a used car every month. Pay the rent.”

In two congressional hearings last week, Federal Reserve Chairman Jay Powell (Jay Powell) Repeated questions Legislators questioned the affordability of housing, which shows that rising costs are becoming more politically sensitive, both for Democrats and Republicans.

“I don’t know what will happen to house prices in the future. But there is a lot of demand,” Powell said. “Even if mortgage interest rates will eventually rise, I think we will see a lot of demand. So the question is, how much supply can we bring to the market? This is really beyond our control.”

Housing experts said that as home builders tried to catch up with demand after a suspension at the beginning of the pandemic, supply constraints remain severe. Changing zoning restrictions to allow more housing to be built is an often controversial process that can take a long time to achieve.

Wolf said that the areas with the biggest rent increases currently occur in sunny belt states such as Arizona and Texas, while the increase in major coastal cities such as San Francisco is much more moderate.

Some economists worry that when the pandemic eviction order is cancelled later this year, landlords may increase rents to make up for the loss of income, based on the expectation of higher property values ??and rich tenant income.

But other economists believe that housing inflation will not be a problem, pointing out that the transition is slow and cyclical. Julia Coronado, co-founder of MacroPolicy Perspectives, said: “We are not entirely worried or believe that we have seen a regime change in inflation.”

Even so, US Secretary of the Treasury Janet Yellen (Janet Yellen) expressed concern last week about the overheating of the real estate market, especially in the extent that it affects low- and middle-income families.

She told CNBC: “I do worry about affordability and rising house prices will put pressure on first-time home buyers or families with lower incomes.”

At the Fed, the debate surrounding housing inflation is taking place as the central bank is preparing to start slowing its monetary support for the economy, which has led to low interest rates and mortgage rates fueling house prices.

Some Fed officials advocated that the central bank more quickly reduce the purchase of mortgage-backed securities by $40 billion per month to ease some of the heat in the real estate market, but others believe that the impact is small.