Rent Goes up in 89% of Major Markets: Surprising RENTCafé vs CPI Stats

Analysis by Yardi Matrix shows rent prices increased month-over-month in 89% of major markets. Let's compare to the CPI.

The priciest cities for renters remain big urban job centers on both coasts, with Manhattan, NY at the top of the list with an average apartment rent of $4,079, unchanged from the previous month and down slightly by -1% over the year.

If renters living in The Golden State where hoping for a respite from high rents in the new year, they’re not getting it yet. Prices went up again in January in all 5 California cities in the top 10 most expensive for renters, with the highest rates in the state being in San Francisco, $3,448/month. Jersey City apartments, the sixth most expensive in the U.S., also saw increased rates this month, reaching $2,855.

Wichita, KS, Tulsa, OK, and Toledo, OH remain the country’s top 3 most affordable cities for renters, alongside 7 other Midwestern and Texan towns where average rents do not exceed $730/month, a fraction of the prices in coastal cities. In fact, things have been quiet in these parts of the country, as rents remained flat or grew slower than the national average in 9 out of 10 cities. Fort Wayne, IN was the only one to see a significant jump in prices for the year, 4.5%.

Key Takeaways

  1. The national average rent was $1,361 in January 2018, 2.8 percent higher than this time last year, and flat month over month, according to data from Yardi Matrix.
  2. 89 percent of the nation’s biggest cities have seen rents grow in January, in 9 percent of cities rents remained unchanged, while only 2 percent experienced rent drops compared to 2017.
  3. America’s smaller cities are continuing to see the greatest increases, with Gilbert, AZ (8.5%), Roseville, CA (8.5%), and Fort Collins, CO (7.9%) breaking the top 10.

Whoa Stop!

Please re-read point number one.

I received the article about a week ago from the RENTCafé but held off writing this article until today over concerns about the national average.

My contact confirms the national average is a weighted average, not simply an average of all the markets straight up.

In simple terms, New York has more weight in the national index than Chicago. In turn, Chicago has more weight than St. Louis. The same applies within smaller geographic areas.

This is exactly as it should be, and it stopped me in my tracks. The following chart will explain why.

CPI OER vs. Primary Rent

National Rental Increase Estimates

  • RENTCafé: 2.8%
  • BLS OER: 3.17%
  • BLS Primary Rent: 3.69%

The RENTCafé data is for January but the BLS data is for December. Assuming the data was reflective of December, the reported CPI would have declined a fair amount.

CPI data for January is due February 14. At that time, we will be able to calculate the actual impact if the BLS was to use Yardi Matrix data instead of its own.

The preliminary indication is the CPI would be lower and this is contrary to expectations given news that rents rose in 89% of major markets.

Mike "Mish" Shedlock

sorry the last one was posted as #3 but maven kept changing it to #1.

#4 Real estate taxes keep going up.

(edited)

Of course technology can play a part in rent. Improved construction techniques can be applied in construction, for example, especially in insulation. This, in fact, is a problem with looking exclusively at the rent. The real cost of living in an apartment is the rent plus the utilities. Say you have two apartments to choose from. The first is $1000/month to rent, and gas/electric run $300/month. The second is $1100/month, but gas/electric only run $75 due to better insulation. If you move from the first into the second, your "rent" goes up from $1000 to $1100, but your cost to live there falls from $1300 to $1175. Is that inflation (since the rent went up), or deflation (since the total cost to live there fell)?

Rent for one bedroom in my area outside SF is around $2200+. People have to demand higher pay from their employers to help with excessively high rents or they have to double, tripe even quadruple up in a one bedroom apartment to afford the rent.

Meanwhile all the extra money that landlords are making (many at least double on rents from what they were making just 4 years ago) has to have an affect on local service and food prices, leading to more inflation.

The first graph shows average rent increased from about $1060 in Jan 2007 to $1361 in Jan 2018. The is about 2.3% per year compounded over the 11 years. Reported CPI over the same 11 years is about 2% compounded. This indicates that national average rent has increased slightly faster on average than overall CPI over the last 11 years. This is not surprising. As population increases the scarcity value of stuff that cannot be made increases (for example choice land in desirable locations). In addition, standards for what is considered acceptable housing have gradually increased over time.

The manipulation of CPI by a country's statistical agencies was never so obvious to me this week. Received my CPI-related pension increase of 1.6% (Canada) while seeing increases in municipal taxes (3%), chiropractor (13.2%), and physiotherapist (4.6%). While the municipal tax increase is the lowest I encountered this week, It is typical of our town to increase these at 2-3x CPI for the past couple of decades. Yep, inflation is tame...

"Rent Goes up in 89% of Major Markets" Homelessness has increased dramatically in Los Angeles. Wages have not kept up with rental increases. This morning there was a news story about the L.A. city council wanting to set up trailers in a downtown parking lot for homeless people. Local businesses are not thrilled with the idea, saying it will attract even more homeless people to the area.

@themonosynaptic
Construction of housing is no less amendable to improved technology and increased efficiency, than any other product. Cellphone rents would have gone up just as much as housing ones, if “zoning”, “cell phone use” laws and limited numbers of government issued “cell phone construction permits” prevented people from building more of them cheaper, to satisfy increased demand.

As much as simpletons can obviously be easily indoctrinated to believe so, the world doesn’t consist of all manners of weird, strange, “we are different” “special snowflake” goods, that magically don’t abide by basic economic laws of supply and demand.

Housing is no different than cellphones, “health care,” guns, cars, cocaine, education nor airplanes. As in, no different whatsoever. At all. In any way. Left free to improve either one, people will. Increasing supply. Improving quality and increasing available quantity. Hence lowering costs. The less freedom people have to make such improvements, the less supply will increase, hence costs decrease.

When there is no freedom left whatsoever, as in housing in most of the West, and agriculture in China during the cultural revolution, you get increasing, instead of decreasing, costs, lack of supply, shitty quality, homelessness and starvation. IOW, the usual, unavoidable, obvious to anyone even half literate, result of government involvement and the so called Rule of (arbitrarily made up for the benefit of the connected) Law.

They have to under report CPI to limit the COLAs so seniors will have to eat cat food.

I hear the meme about city officials in the snowbelt giving free bus tickets to San Diego for their homeless residents. San Diego had to add (expensive) emergency shelters to handle the overflow from "flyover" America. They did it by raising the hotel tax on visitors. So what goes around.

@RonJ
“Local businesses are not thrilled with the idea, saying it will attract even more homeless people to the area.”

And, touche, therein lies the problem! If “local businesses” could ban cell phones, to keep demand high for their existing rinky-dink payphones; cell pone supply, cell phone prices, and cellphonelessness would demonstrate exactly the same behavior as their housing equivalents are currently doing.

Textbook illustration of the difference between freedom, leaving people free to innovate and improve their own and others’ condition; and the lack of it: The former resulting in rapid improvements in both quantity and quality of available goods at ever lower prices; the latter of permanent, and ever worsening, shortages. All for the benefit of the idle and connected “owners” of a few privileged “local businesses.”