The Fed risks triggering a ‘doom loop’ keeping rents high and homeownership out of reach, economist warns. Is he right?

As Fortune reports, Slok is warning of a “higher rent doom loop” if Federal Reserve Chair Kevin Warsh raises interest rates further.

The new Fed chair raised rates in September — the first rate hike in more than three years — and indicated there could be more rate increases to come this year and next.

In a note, Slok wrote: “When rates are high, builders build less, and when fewer homes and apartments get built, rents go up, which pushes inflation higher and keeps rates high. Call this the ‘higher rates, higher rent doom loop.’”

He added that “this re-acceleration in rents is a problem for the Fed because it puts upward pressure on inflation driven by higher rates.”

So should Americans brace for rent hikes? Joel Berner, chief economist at Realtor.com, says no — at least not for a few years.

“I don’t think this is going to be an imminent problem,” Berner told Moneywise. “I think this is a few years down the road.”

Moneywise reached out to Apollo but did not receive an immediate response.

For now, rents are falling, not rising

Berner suggests that Slok’s warning of a “doom loop” is missing some context about supply, demand and price (in this case, monthly rent).

“It’s really only a ‘doom loop’ if there are no forces acting against it,” Berner said.

He pointed to the impact of higher rents on rental construction, noting that builders tend to build more rental units as rents rise — even if interest rates are rising too — until the cost of construction (including interest rates) outweighs profit from rent.

For example, after the Fed slashed interest rates down to 0.25% in 2020, it increased them from 2022 on until the benchmark rate reached a high of 5.5% in 2023, per Forbes. Then the Fed started cutting rates again, right up until this September.

Throughout this period of both low and relatively high (still moderate) interest rates, rents remained higher than they were prepandemic. Builders built more rental units, as Stateline reports. By the spring of 2025, the number of new rental apartments had hit a 50-year high.

That resulted in increased supply, and rents began falling as of 2023 as supply began to outstrip demand. Realtor.com’s latest report shows that average rents fell for the 37th straight month in August. Even New York City’s average rents are flat, Berner reports.

The only cities, according to Berner, where rents are rising are: