Warren Buffett's favourite bank thinks your rent may be about to go down

Wells Fargo thinks your pocketbook may be getting some relief if you rent your living space.

During the bank’s conference call following their second quarter earnings, CEO John Stumpf was asked about the state of the commercial real estate (CRE) market and the bank’s lending to those firms after a major US bank regulator called out CRE as a danger spot for banks.

Stumpf said that while there has been a significant increase in lending for certain types of CRE, the boom in apartment and condo building over the past few years may be tapped out.

“There are other [types of CRE] that have a lot of supply that’s coming on, has come on, has to be absorbed” Stumpf said during the call. “That creates a different dynamic. We’re seeing that in some multi-family or luxury single family [buildings] from market to market. And in that market, those dynamics have to play out where that gets absorbed at some clearing price.”

Stumpf is correct that there has been a boom in multi-family housing builds, which have hit levels not seen in decades. In turn, that over-supply will drive down rents and prices for luxury homes.

These sorts of declines are concentrated mostly in major metros, but in aggregate it appears that rent nationwide is at least slowing its red hot pace of increase.

While Stumpf said this isn’t going to impact Wells Fargo much, which is good news for Warren Buffett who owns 10.012% of the bank through his firm Berkshire Hathaway. Outside of billionaires, it’s also good news for anyone who is worried about increasing rents.

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