What Happens When Millions of Renters Can No Longer Afford High Rents and Move Back Home?

November 28, 2023

by Charles Hugh Smith Of Two Minds

What’s no longer affordable is eventually jettisoned, including high-rent homes and apartments.

Recency bias can stretch back 40 years. It’s been over 40 years since the U.S. experienced a deep recession (what I call a “real recession”) which is characterized by elevated inflation, interest rates, yields, unemployment, defaults and bankruptcies, none of which can be reversed with air-drops of “free money” because higher inflation, rates and yields all limit central bank money-printing and fiscal “free money” via deficit spending.

Without air-drops of trillions of dollars in “free money”, the accumulated excesses of the economy have to sort themselves out the hard way via defaults, bankruptcies, insolvencies, layoffs, tightening credit and reduced spending / consumption.

The last time this burn-off of excesses could no longer be pushed forward occurred in 1980-82, the deepest downturn since the Great Depression in the 1930s.