The headline CPI looks tame in November, rising only 0.1 percent. But for the second month, a good headline number is an energy mirage. Rent, which is sticky, rose at least 0.4 percent for the 28th month. 
Yet Another Groundhog Day for Rent
I repeat my core key theme for over two years now. People keep telling me rents are falling, I keep saying they aren’t. I thought this may finally be the month the rent trend breaks but it wasn’t.
Rent of primary residence, the cost that best equates to the rent people pay, jumped another 0.5 percent in November. Rent of primary residence has gone up at least 0.4 percent for 28 consecutive months!
The “rents are falling” (or soon will) projections have been based on the price of new leases. But existing leases, more important, keep rising.
According to the Census department, only 15 percent of renters move each year. It’s been a huge mistake thinking new leases and finished construction would drive rent prices.
With rents out of the way, Let’s tune into the BLS Report for the details.
CPI Month-Over-Month Details
- The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in November on a seasonally adjusted basis, after being unchanged in October.
- The index for shelter continued to rise in November, offsetting a decline in the gasoline index. Shelter rose 0.4 percent, rent of primary residence rose 0.5 percent, and Owners’ Equivalent Rent also rose 0.5 percent.
- The energy index fell 2.3 percent over the month as a 6.0-percent decline in the gasoline index more than offset increases in other energy component indexes.
- The food index increased 0.2 percent in November, after rising 0.3 percent in October. The index for food at home increased 0.1 percent over the month and the index for food away from home rose 0.4 percent.
- The index for all items less food and energy rose 0.3 percent in November, after rising 0.2 percent in October.
CPI Year-Over-Year
CPI Year-Over-Year Details
- Over the last 12 months, the all items index increased 3.1 percent before seasonal adjustment.
- The all items less food and energy index rose 4.0 percent over the last 12 months matching the year-over-year price in October.
- Shelter is up 6.5 percent from a year ago. Rent of primary residence is up a whopping 6.9 percent from a year ago.
- The energy index decreased 5.4 percent for the 12 months ending November, while the food index increased 2.9 percent over the last year.
Why Are Americans in Such a Rotten Mood?
Repeating what I said a month ago, other than the huge drop in energy, this was not a benign report.
For discussion, please see Why Are Americans in Such a Rotten Mood? Biden Blames the Media
People can cut back on some things but rent and food are not in that list.
For the 36 percent of the nation that rents, Bidenomics has been a complete disaster.
Is the BLS Is Overstating Rent and Exaggerating Inflation?
On December 7, I investigated A Curious Claim that the BLS Is Overstating Rent and Exaggerating Inflation
I provide solid evidence that the BLS has been doing no such thing.
Nonetheless, assume inflation slows along with rent. At some point it’s bound to happen.
The key question then becomes: Was inflation transitory or is it the easing that’s transitory?
Please see the above link for my take on inflationary pressures and how long they might last.
This will be the decade of getting squeezed for everyone but the top 1% of income earners. I do expect contagion to occur the next time down similar to 2007-2009.
Rents are NEVER going to decrease. Property taxes, property insurance and cost of maintenance are going to significantly increase, therefore landlords are going to increase rent to cover the increasing cost of these items.
That we’ll may be. But there will be more homeless people everywhere.
I am not an economist, but could rent be a double-edged sword? Real Estate is capital intensive and the cost of capital is high to buy or build as rates go up. I would surprised if rent and housing went down quickly.
Rent of primary residence is the least volatile. It was a lager for a year and a half, until May 2022. It’s at the top, bc the rest dropped faster. Rent might catch up with
the rest. Food leads the plunge with the CPI. If both drop < zero rent might join them in 2024.
Many renters take public transportation so decline in gas really doesn’t affect them However anyone notice how big box stores in the suburbs have much lower prices than their branches in the city (ex. Target) ,they also very much discourage people from the ‘inner city ‘ or anyone without a car or arriving by non private vehicle. I mean huge set backs wher the front is all parking, public transportation never allowed to drop off pick up in front of stores. Malls like American Dream in New Jersey at the Meadowlands charge $50 each way from Manhattan obviously they only want car free whites from Manhattan etc. it’s another way not having a car, being a low income person of color is very expensive in the USA today
The CPI-U has actually gone down for the last 2 months. Based on the last 3 readings, annualized inflation has been 0.1% (!)
Is the BLS too bashful to claim there’s deflation? Because that’s what the unadjusted numbers are showing (the ones the federal COLAs are based on).
Biden is already pressing Powell to lower interest rates. I suspect any spilling over of Israel’s war with Hamas inflation could get really hot. And real estate isn’t going down much any time soon, especially rentals here in LA…
Outside of impeaching FBJ and Mayorkas in the House, the GOPs biggest lost opportunity for the ’24 election will be connecting the dots from high inflation to illegal immigrants, especially as it relates to rent.
I’ve been saying for months now that the RNC should be funding a conservative documentary group that takes all of this valuable trove of anti-left information / video out in the ether and putting together high-quality shorts that tell the story that needs to be told.
Put all this up on youtube, X, FB etc and dare everyone to censor it.
But for some reason this is beyond these village idiots. Maybe they really don’t deserve to take the WH & Senate back. I’m not sure most could find their way out of a paper bag.
What exactly can illegals be renting? Any legit landlord is going to want a verifiable job and social number to rent to someone. Illegals have neither so they can’t rent from legit landlords. So yeah, they can rent some very squalid shacks in the slums and ghettos but those aren’t going to be driving up rents anywhere else.
Taxpayers (local/state) are paying the rent for immigrants (note, they are not illegal unless they miss their court date in 2026) until they are able to “get on their feet”. The Gov’t pays the rent and any damages due to tenants. It’s Friedman’s fourth type of spending and the least effective (spending someone elses money on someone else).
You Texan’s might not see this as much as NY/CA folks. FJB quietly bails out the states/cities with money like the train to nowhere in CA.
Agreed. To act like illegals have NO effect on housing inflation is just idiotic & not grounded in ANY sense of reality.
Brilliant! You got it all figured out. No, dude, illegals are a significant part of the rise in rent. Are they the only cause of all of it? No, of course not. Next, you’re going to claim that illegals aren’t having an effect on food inflation.
All I know is in my neck of the woods, I don’t see an illegals homeless crisis. Somehow some way, they’re living with someone who’s legally paying the rent, and the landlords know EXACTLY what’s happening. This is the very reason they’re able to raise rent in these sorts of situations.
Nice try, but you’re 100% wrong on this one. Sorry. No, not really.
Where exactly are you living (you didn’t mention)?
I live in Southern Florida. I know a couple of small landlords (50-100 units) and they aren’t renting to illegals that are getting paid by the government.
While the government is paying for some things you mention, it’s local, not country wide. In other words if lots of illegals are having rent paid for them in southern Cali / Texas / Arizona etc then sure, rent there may be soaring locally but it’s not having any affect here in Florida or in the flyover states or the East coast states etc.
I live in north ATL, and I don’t see illegals living on the streets. Where and how they are living, I have no idea. But what I do see is tons more shopping at my local Wally World.
But there’s got to be all sorts of ways for illegals to pay rent to someone.
But using NYC as an example in terms of guaranteed government money, you honestly think that the flood of migrants into NYC is pushing down rent prices?
If you talk to a realtor, they’re always yammering that we need to build millions of more homes. So the fact of the matter is there’s constrained supply with massively increased demand. That’s ECON 101 for higher prices.
FJB has let in 10M illegals in under 3 years, so it’s absolutely crazy to think that 10-14M new people aren’t affecting rent prices. That’s simply ludicrous!
I suppose I don’t dare ask how you know they are illegal just from sight – LOL. Maybe they are just legals who are coming to Atlanta because it’s cheaper than California or NY etc.
Of course there are ways to pay cash rent to someone in the same way you can pay cash to have someone maintain your lawn (what I do in Florida). But the types of people who rent to those people tend to be slumlords (ie renting rooms in seedy motels or condemned buildings). There is no way a landlord is renting a 2K a month nice apartment or home to illegals for cash because they don’t have to take on that risk (plenty of legal people who will pay that).
The country always needs more homes because the population is ever increasing at a rate of about 1%. That doesn’t sound like much but in a country with 330 million that means 3.3 million people (legals by the way) need new homes each year and that’s before illegals are factored in.
Anyway, 10 million illegals in 3 years is 3 million a year. That’s 1% of the population of this country. So at most they should be affecting rent by 1% if they were spread evenly which they are not. Instead they are probably really pushing up rents in a few places where they are concentrated.
Supply & Demand!!!
Again, they’re NOT the only reason. But if rent is up 5%, then their 1% is 20% of the rise, and I would be that’s a BIT conservative.
Great read over @ Breitbart. Spot on with just enough humor.
Nolte: Average Monthly Mortgage Payment Explodes to $3,322 In Biden’s America (breitbart.com)
Landlords will take any money that helps with their cash flow. They do not discriminate…they cannot afford to do so.
The illegal share rooms in apartments or houses and live like sardines.
Jobs they have, fake ID they can get. Their landlord will charge them weekly rent with 2 weeks security.
IL is giving these migrants/illegals $9,000 in rental assistance. Link:
link to fox32chicago.com
Your first mistake and over-riding issue: you BELIEVE that the parties do not think and act alike. THEY DO. It is ONE party and their official meme’s are concocted over Cigars and the best Booze on Earth. IT IS A “SHOW.”
Entertainment pushed upon us a “serious business” for the Citizenry. We are their very last thought.
Rents will be driven up by two factors — the increasing property taxes (paid for by rents) as more and more local government employees retire with 80% of pay as a pension, and two, the shortage of available apartments that have been bought up by hedge funds and private equity with 0% borrowed money for the last 14 years, with corresponding increases in rents because … they can.
Rental costs reflect the landlords cost to some degree. Interest rates are up, insurance costs are up and real estate taxes are up. These don’t signify lower rents.
Now we see what actually drives rent prices, which is just as much interest rates as real estate costs. Most landlords use leverage, and even if they don’t they have to be concerned with what rate of return they could get in T-Bills. It’s stupid to own real estate if T-Bills are paying more. Then there are rising taxes and the cost of maintenance and the risk of squatters, etc. Add it all up and rents might go way higher.
I suspect the big driver is taxes, insurance and maintenance which hits homeowners equally as hard as renters. Most landlords either own outright or have a fixed mortgage that isn’t changing in price so that cost is ‘known’.
Unless you own the rental mortgage free (or close to), the comparison with TBills will always be better for being a landlord. The reason is the leverage makes it so. For example if you have 10K down and a 90K mortgage on a 100K house and the rental income returns 1K a year profit after taxes/maintenance/insurance etc then your rate of return is 10% (not 1%) which exceeds TBills.
Millions of people have come over the border in the last three years. Surely somewhere they must be pushing up the costs of rents.
I’ll be raising rents on my tenants this year. Everything going up about 7-10%. Haven’t decided yet.
Have to look for a new health insurance. I got notice that it will go up 30% next March because turning a year older.
Spoke to my house/car insurance guy. He’s worried about his job. His company, a big one, is thinking about moving out of California. He said they were telling him they’d have to raise rates maybe 50% in order to stick around.
This constant blathering by financial fools (not Mish) that inflation has been tamed is nothing but propaganda. Do they work for the government? If it’s the Fed, then the answer is clearly yes. The Fed is concerned that the upper class will turn against the government if they do a Paul Volcker. That’s the only people who think this government is doing a good job.
There will come a point, and it already is happening, where Americans (especially the older) will have to move out of the country to afford living and less expensive medical care.
The way we have been going starting with the end of the gold standard is unsustainable.
I would contend that people are miserable because the price level is 20% higher than 3 years ago, and just because prices lately are rising at 4%, they are still much higher than people remember. in addition, they didn’t get 20% raises
I totally agree. For example. they are not looking at cumulative over 7-10 years. Read a really good article a month or so ago and this author examined this and it was enlightening. Something we already know, but the financial geeks can’t figure out.
In GA, a lot of counties property taxes went through the roof in 2023. I’ve owned 5 houses and NEVER has my assess value exceeded 80% of my fair market value. The assessors have ALWAYS held back that 20%. Not this year to the tune of a 22% increase. Now, my home’s assessed value is 95.2% of its fair market value. It’s so bad the governor had to pass a law that gave everyone an 80% break on this year’s increase.
Insurance & property taxes are costs that are EASILY exceeded 2-3X the “official” inflation numbers. It’s just bonkers.
And the reason the assessors did it was because EVERYONE was predicting a recession this year, so they pushed values up sky high. They wanted to get extra money before prices started falling. But, prices aren’t falling in most areas of GA which remains a very HOT real estate market in relative terms.
I’ve never in my 40+ years of adult life seen anything like this. Again, it’s bonkers.
If you own 5 houses and are in sour mood, imagine those who rent and have to cope with everything else you do.
Homeowners aren’t much happier than renters. The big driver of rising costs (insurance and taxes) hits them equally hard as it does renters.
So while I don’t pay rent, my monthly payment is going up 4+% too because my escrow costs are rising.
Well-known indexes of market rents—like the one published by Zillow—capture rents of units currently advertised on the open market, and don’t capture rents for units occupied by continuing renters like the CPI does. Rents change when leases expire, which typically happens annually. This can lead to a lag between changes in indexes like Zillow’s and those in the BLS’s rent measure.
How would you debunk the notion that they can always prevent recession or a banking crisis by money “printing” without triggering inflation? Suppose there’s a massive bank failure or downturn. They “print” enough money to just overcome it. Since the amount “printed” equals the amount lost, they balance. The deflated balloon gets reinflated to the same degree.
I ask this because Japan seems to completely get away with many years of this sort of thing.
The Japanese government issues debt at near zero percent, and the BoJ prints to buy it. No private entity in its right mind would buy into it. Japanese companies still manufacture a lot of quality stuff, but anecdotally are loosing ground to neighbouring economies. I think the Japanese were in sour mood even sooner than Americans, but then again, they have a government that takes care of the Japanese and doesn’t brood about other self-destructive cultures.
Thank you! And somehow, the Yen is a reserve currency !
It is a comparatively strong currency because the world trusts the Japanese brand, it can be traded freely, and intermittent interventions keep the exchange rate stable – until recently. Also, Japan Inc. would sooner commit harakiri than default.
You can prevent a banking crisis this way (the Fed was doing something similar by allowing banks to park cash there and paying 1% on the money in order to reflate the banks).
Not sure you can prevent a recession this way though because to do that you have to get the money into peoples hands and those people then tend to spend it which then creates increased demand for goods/services which will then start inflation (this is essentially what happened during Covid).
Suppose GDP goes down by 1%. The government hands out 1%. And we’re back. Yes, this feels simplistic but I lack cogent arguments against it.
Why would the government need to hand out 1%. They could far easier just increase their own spending by 1% since government spending also contributes to GDP.
While technically true, the government doesn’t know there will be 1% lower GDP until after the fact. So they can’t spend (or hand out) an extra 1% until the next measured time frame (quarter, year) and that risks the fact that the economy recovers the 1% on it’s own and suddenly you have an extra 1% GDP demand for nothing (ie handout / wasted spending) creating runaway inflation.
Wine at home -0.7%. Looking good.