New York City renters are faring particularly badly with rising rents because wage growth isn't compensating as well as in other parts of the country.
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New York CNN —
The American dream of homeownership is looking more like a nightmare.
With inflation heating up again, the Federal Reserve is in no position to consider lowering interest rates at its upcoming meetings. That’s helped push the average fixed rate on 30-year mortgages above 7.2% after five straight weeks of increases.
Consumers aren’t expecting mortgage rates to come down any time soon. Over the next year, they anticipate that mortgage rates will rise to nearly 9%. Over the next three years, they expect rates that are close to 10%. That’s according to a New York Fed survey gauging consumers’ expectations of the housing market, released Monday.
On top of that, households are bracing for a resurgence in home prices over the next year after they had started to ease back last year.
But here’s the catch: Renting is also far from a bargain these days. Consumers are gearing up for even bigger increases compared to the expected rise in mortgage rates over the next year, the New York Fed survey found.
The issue of rent affordability is particularly pronounced in New York City, where housing costs have always been notoriously high compared to other parts of the country, absent a brief respite during the pandemic.
But what’s making the burden weigh even heavier is rents in the city grew seven times faster than wages last year, according to an analysis Zillow published Tuesday. That’s the biggest gap across 50 of the nation’s largest metro areas. Nationally, however, Americans’ wages increased at a faster pace than their rents last year.
The Fed’s role:The strong jobs market the Fed has sought to preserve while reining in inflation is working against New York City renters, Kenny Lee, a senior economist at Zillow-owned StreetEasy, said in a statement on Tuesday. That’s because new home construction in the city is especially struggling to keep up with the demand coming from the availability of jobs.
Would the situation be any different had the Fed been quicker to raise interest rates to fend off rising inflation back in 2022 when it hit a multi-decade high?
“It’s possible that inflation would have gotten back to target quicker if the Fed had hiked sooner,” Aditya Bhave, senior US economist at Bank of America, told CNN. If that happened, the central bank may not have needed to keep rates at the current high levels for so long.
That could have helped prevent mortgage rates from rising as high as they are now because, as Minneapolis Fed President Neel Kashkari said in a Bloomberg TV interview Tuesday, housing is “traditionally the most interest-rate-sensitive sector of the economy.”
However, Bhave said “hindsight is 20/20 and a lot of the inflation was caused by supply disruptions that the Fed couldn’t have prevented.”
The other side of the equation is that had the Fed not kept interest rates at near-zero levels for two years, many current homeowners who locked in low rates wouldn’t have been able to afford to own a home.
One of the dangers now is that the many Americans delaying plans to buy a home may not “get to participate in home value appreciation, which could affect the distribution of wealth in the long run,” Bhave said.
Slaughterhouse cleaning company fined $649,000 for employing child workers
A janitorial company has been fined $649,000 after an investigation found it hired minors for dangerous jobs cleaning slaughterhouses, the United StatesDepartment of Labor said Monday.
Fayette Janitorial Service had employed at least 24 children, including those as young as 13, according to the DOL investigation. The minors had been working overnight shifts at two separate slaughter facilities, according to the DOL.
Federal labor law bans children from certain jobs in slaughtering and meat packaging plants, including using or cleaning machinery, due to the hazardous conditions.
This isn’t the first instance of recent child labor violations in the meatpacking industry.
Children were found working at Seaboard Triumph Foods Plant in Sioux City, Iowa, and at a Perdue Farms poultry processing facility in Accomac, Virginia, according to the DOL. “Minors were used to clean dangerous kill floor equipment such as head splitters, jaw pullers, meat bandsaws, and neck clippers,” the Labor Department said ina February news releasedescribing the findings of its investigation.
Perdue “terminated our contract with Fayette Janitorial Services prior to this court filing,” a company spokesperson told CNN in a February statement, adding, “underage labor has no place in our business or our industry,” the statement continued.
Seaboard, a pork processor, told CNN in a statement that it “immediately terminated all contracts with Fayette,” upon learning of the Labor Department’s allegations. “Such conduct, if true, is in violation of our company’s policies and procedures and in violation of the strict commitments made by Fayette in their contract,” according to the statement.
“Our company will continue to take all appropriate follow-up measures to protect workers and ensure accountability for compliance of its contractors with labor and employment laws,” Seaboard said.
Instances of illegal child laborhave been growing in recent years, and other contractors have been fined over employing minors. Last year,Packers Sanitation Services paid $1.5 millionin civil penalties for employing minors in hazardous occupations and having them working overnight shifts, according to a DOL investigation.
TikTok sues to block prospective US app ban
TikTok sued Tuesday to block a US law that could force a nationwide ban of the popular app, following through on legal threats the company issued after President Joe Bidensigned the legislationlast month, reports CNN’s Brian Fung.
The court challenge sets up a historic legal battle, one that will determine whether US security concerns about TikTok’s links to China can trump the First Amendment rights of TikTok’s 170 million US users.
The stakes of the case are existential for TikTok. If it loses, TikTok could be banned from US app stores unless its Chinese parent company, ByteDance, sells the app to a non-Chinese entity by mid-January 2025.
In itspetition filed Tuesdayat the US Court of Appeals for the District of Columbia Circuit, TikTok and Bytedance allege the law is unconstitutional because it stifles Americans’ speech and prevents them from accessing lawful information.
The lawsuit followsyears of US allegationsthat TikTok’s ties to China could potentially expose Americans’ personal information to the Chinese government.
