As the peak rental season is nears its end, the Rent Cafe reports Apartment Rent Increases Lose Steam.
Key Takeaways
- The national average rent reached $1,469 in July, up by 3.4% ($48) year-over-year, and 0.2% ($3) month-over-month, according to data from Yardi Matrix.
- 64% of the 260 cities included have rents below the national average, while 36% have average rents above.
- The average rent in the country’s most affordable city, Wichita, KS, reached $660, while the average rent in Manhattan was $4,222.
- July displayed the slowest month-over-month increase since February, which at 0.2% is a clear signal that peak rental season is nearing its end. The trend is in line with last year’s data – once the busy late spring to early summer period winds down, rents are expected to slow their growth throughout the rest of the year.
- Only 8 out of the 260 cities in the study saw month-over-month jumps of more than 1%.
Rental Market Report
California and the mid-Atlantic states lead the way in high rental prices.
MegaHubs
Most Searched For
CPI OER and Rent
Rent Cafe vs BLS Year-Over-Year
- Rent Cafe: +3.4%
- CPI Primary Rent: +3.8%
- CPI Owners Equivalent Rent OER: +3.4%
The Rent Cafe is inline with the BLS on rental prices.
Mike “Mish” Shedlock
Everyone in Los Angeles is tapped out. I just don’t see much more headroom for anything (that is tied to actual market forces) to continue to go up in cost.
Many economy watchers claim that any economic crisis will result in massive deflation but hidden forces may prove them very wrong. One place inflation has been most obvious is in the replacement cost of buildings and infrastructure destroyed or damaged by natures fury. The article below looks at several trends which point to the reality we should expect rents and housing cost to edge higher in the future.
In my city, I see many, many huge complexes being built, all over town. That tells me that the vacancy rate is low (for now). Meanwhile, the city is not growing, and we are reaching a point at which millennials may being family formation and prefer homes. Also, we should see empty nest baby boomers start selling their big homes, and moving into something smaller. Will the boomers move into apartment mega-plexes? I doubt it. I kind of expect to see falling high-end home prices combined with construction of high-end duplexes and similar, plus a shortage of lower end homes, combined with a glut of apartments.
Complexes are being build because money is cheap and plentiful, that is the reason plain and simple.
My frustration with America’s housing policy boiled over when I read a piece about how roughly 80% of new apartment construction was for the high-end luxury market. The government holds huge responsibility for a rising share of our housing problems in low-income situations because its policies avoid dealing with the growing number of tenants that are irresponsible.
Government housing cherry-picks the best of the low-income renters providing them with very low rents and nice apartments and dumps the rest on the private sector. The following piece argues the best way to address or level the playing field would be to move away from public housing and give those needing housing aid “rent only vouchers” that could be used with any landlord rather than putting these people into a quasi-government ran project.
One of the things that’s driving rent up is Section 8. I’m an American citizen and lived in the USA until 2006. In Nashville, I could easily find apartments and they were affordable. I lived in Asia for nine years and when I returned, my former employer in Nashville offered me my old job, which I accepted. Most apartment complexes that I went to said they had apartments available, but I couldn’t have one since I was making over the $28,000 Section 8 limit. These were very nice apartments too. It was so bad that I couldn’t find a place and my boss and an operations manager were offering to let me stay with them at their houses until I could find a place that rents to non-welfare people. I eventually returned to Asia since I can find apartments here. I don’t know what the US governments motive is in turning apartments into Section 8 projects. Is it to shoehorn non-welfare people into houses? It seems to benefit only the welfare class and the real estate industrial complex at the expense of ordinary Americans. In the long run, it worked out for the better since I had to have an emergency appendectomy and I was lucky to be in South Korea where the surgery and three nights in the hospital were only $300. Anyway, I think Section 8 is one of the big things that is driving up rent costs through the laws of supply and demand.
Exactly let poor people live in the street. There is no such thing as landlord greed(sarcasm off)
Why not have government housing the way it was yesteryear instead of taking affordible housing away from the working middle class and moving welfare families into it? I’m all for the poor having a roof over their heads, but why put welfare families into luxury apartments? Anyway, the USA has one less taxpayer and there’s one more taxpayer in the Far East. It’s a shame the USA has to borrow the taxes I pay to Asian governments and pay interest on it just because there aren’t enough American taxpayers to fund Section 8 and other programs.
Retrospectively, your employer should have offered a lower salary, until you got in your apartment. Then once you were in, turn around and raise you back up to your old salary. Of course you’d have to trust him to do that. Many employers might not.
Thus, the unavailability of non-section 8 housing probably will drive lower wages. That’s really weird for Nashville. I wonder what it means.
In Oregon progressives passed a law that said landlords could not discriminate based on source of income, that sounded innocent enough till it went into effect and landlords realized that it meant they had to accept section 8 HUD vouchers or face an $11,000 fine for each instance of “discrimination.” So, they found loopholes, HUD will only pay up to 135% of a statistical region’s median rent, so landlords just raised rents to above what HUD could by law pay.
But, they also took out appliances because poor people on HUD cannot by law have savings/assets, and usually would have a hard time even getting credit at Aaron’s rentals where appliance cost 4 times what you would pay at Home Depot or Best Buy. I saw one place that they had removed even the stove.
Rent in this county has jumped by 90% since my 2013/14 lease period. I had $725 budgeted for rent then, now $1,300. And what you get for that is not much, I have seen RV sites on private land offered at CraigsList for $700. The vacancy rate was 5.6% then, it is under 1% now and most of those are either really substandard, or they are at the high end of the market. There really are only about 30 unique ads that are non scam now in this County per day, a place of about a quarter million.
So, do they admit their law had disastrous unintended consequences? No. They just passed another law, this one was the nation’s first statewide rent control law. And of course landlords fearing they will be locked in over decades to a certain percentage increase moved to raise rents to male their base rate higher, that way in future their upward limit increases would be higher.
Two reasons why rent control has never worked anywhere it has been tried, it basically guarantees that landlords will raise the rest to the limit allowed every year lest they lose out. It is not a matter that they can charge the rent plus allowed increases over the base period when the law took effect, so they could for example not raise rents on a desirable tenant they want to keep, then make up for it 5 or 10 years later by raising rents the cumulative allowed over the period. They can only raise the rent the allowed limit for that year, if they do not they lose that opportunity, their base rent can only be adjusted for the given year.
The other reason is that banks do not want to make construction loans to projects that are rent controlled. Full stop, builders who want to do developments have to find other financing or self finance, something only large corporate builders can do.
So, you would think the legislators/governor would finally be getting the message after 4 or 5 years of this but NO! They are now passing a law that declares a housing emergency and suspends city and county ordinances and zoning that would require that multifamily housing can be built in what was previously zoned only for single family residential areas. As of right now this law does not require that multifamily units be built among these developments, but it is a mere pen stroke away to require that builders add subsidized multifamily to any projects.
Our rate of increase in rental prices is more than triple what is being reported in the story above. One of the real problems here is that shelter is the largest weighted category of the CPI and it is based mostly on owners equivalent rents. A very small survey (no doubt in cherry picked neighborhoods in low inflation states) which asks homeOWNERS what they would have to pay if they had to rent equivalent housing. For one thing, someone who has owned their house for 10, 15, or more years has absolutely no F’ing idea what rental markets are like, they are biased and will simply tell the survey what the maximum they would be willing to pay, since they bought so long ago that will be in line with what their mortgage payment is if not less. That just does not reflect the reality of rental markets at all. I have a buddy for example that bought a townhouse in 2009 for $93k when prices were devastated by the GFC, he had a bad breakup and decided to move to Denver, he rented out his place of $750. He now charges $1,350, His mortgage payment is about $635. He only knows the rental market because he is a landlord with a property manager telling him what he can charge. But his neighbors who own and never moved would still be thinking it is around what their mortgage payments are, which is still locked at $650ish. And they would say they would not pay more for that place anyway.
Progressive socialist practices are all about coercion, they are going to make you be fair to those who can’t or will not work even if it means what amounts to confiscation of your property. Nobody WANTS to do the things they want to do or we would already be doing that, especially if it were economically sensible. So, they have to force things on you to realize their uneconomical vision. They have tampered with the traditional negative cash flow rental market paradigm and the results are just what I predicted before the law became effective. Much lower vacancy rates and much higher rents which are now going to be perpetual because of those lower vacancy rates. I for one, having been a landlord, do not blame them even though they are taking advantage of the situation to scalp me. It is not their fault that the MORONS in Salem made these conditions. They would be stupid not to do what they are doing and anyone who understands the first thing about economics and finance will realize, they are only doing what they must.
By the way, there is a recall attempt on the governor, Kate Brown, two actually, but it is ill fated, they need 280,000 registered voters to sign petitions, but Oregon is ruled from 3 far left counties in the Portland Metro. You would have better odds at the roulette tables in Vegas.
In addition to the price of computers rising like crazy, their speed and memory is also decreasing year over year. Or was that prices and sizes of housing? Same story regardless: People getting poorer and more desperate as the country is doing its best to keep up with the Maduros.