Economists say wages are now rising faster than the CPI. That’s not true for those who rent or wish to buy a house.
Wages vs CPI, Rent, Housing Chart Notes
- All data is quarterly, compared to the same quarter a year ago.
- Index levels for all items used to compute the percent changes are normalized to 2024-Q1=100.
- Private wages and total compensation are from the BLS employer cost release.
- CPI and rent are from the BLS CPI series, end of quarter numbers.
- Case-Shiller is the national home price series, end of quarter numbers.
Case-Shiller measures repeat sales of the same house over time, a much more accurate comparison then median or average homes prices that are not adjusted for the number of rooms, amenities, lot size or square footage.
On April 20, I commented People Who Rent Will Decide the 2024 Presidential Election
This post is another look using the 2024 Q1 quarterly numbers from the BLS Employer Costs Report released June 18.
When the June CPI data is released next month, I will update the monthly numbers. For now, consider this as confirmation of my April post but with quarterly numbers.
Key Details
- From 2012 Q2 through 2022 Q4 the cost of housing dramatically rose more than wages.
- Year-over-year housing went briefly negative by less than 0.1 percent in the second quarter of 2023. However, home prices are again rising much more rapidly than wages.
- From 2021 Q1 through 2023 Q1 the CPI rose faster than wages. Since then, wages are rising faster than the CPI which cheerleaders like to point out. But…
- From 2022 Q2 through today, rent has outpaced wages. OK, rent lags. But for 33 consecutive months, nearly three years, the cost of rent has gone up more than wages.
The CPI Is Personal
Please reflect on that subtitle, especially if you are a renter or buy your own health insurance.
The BLS weighs rent at 7.61 percent of the CPI.
Owners Equivalent Rent (OER) is 26.63 percent of the CPI. OER is the cost someone would pay if they were to rent their own home.
Since nobody pays OER, many argue the CPI is overstated.
Yeah right. Tell that to renters looking to buy a home. Those who rent are likely paying 20 to forty percent of their salary towards rent, certainly not 7.61 percent.
Those Who Rent Are Angry
Roughly 36 percent of households rent. They watch home prices soar out of sight while wages do not keep up with rent.
Yet economists tell these renters they should be happy because wages are now rising faster than the CPI. Sorry guys, wages are not rising faster than the average renter’s personal CPI.
And housing prices are not even in the CPI.
The average person likely views rising home prices as inflation. The average jackass economist tells these renters that home prices are a capital expense not a consumer expense.
Lovely. Is that supposed to make renters feel better about obvious inflation?
I’ll tell you what. It makes people angry. And it reflects in the polls.
Who Are the Renters?
In general, young people and blacks.
According to the National Association of Realtors, the homeownership rate among Black Americans is 44 percent whereas for White Americans it’s 72.7 percent.
That’s the largest Black-White homeownership rate gap in a decade.
And that is why Trump is performing up to 18 percentage points now than in 2020 vs with Blacks.
Generational Homeownership Rates
In 2020, Biden captured about 90 percent of the youth vote.
Trump is now leading Biden with young voters. The above chart explains why.
Job Openings vs Unemployment Looks Very Much Like a Recession Has Begun
Unemployment is rising and job openings have crashed. It looks recessionary. Let’s investigate with a series of pictures.
If rent and the price of houses are not enough to make a huge subset of the population unhappy, here’s an added bonus:
Job Openings vs Unemployment Looks Very Much Like a Recession Has Begun
Unless something improves dramatically and quickly, Trump rates to beat Biden in November.
Mish,
If the Democrats replace Biden will the replacement have to take ownership of Biden policies and inflation???/
In an election of the past where voters showed ID and there were few mail in ballots I’d agree that Biden is toast in the next election. Unfortunately I’m not a very trusting person and I see easy opportunities to pad a politicians totals in the new paradigm. You’d think the people promoting the mantra that “we have the most secure voting system in the world” would be publicly challenged by those who point out that most countries in Europe have much tighter controls concerning mail in ballots because of fraud concerns. Sad to say that in the Orwellian U.S. media such observations are not given air play other than “conspiracy theory”. I think the Democratic Party will win the coming very fraudulent presidential election. Trump is a talented politician but I don’t see how he overcomes all of the kings horses and all the kings men that are stacked against him. I hope I am wrong.
Notice Zillow listings for rents for a 3 bedroom townhome in Panama City Beach, FL is around $2300.
Likely only $1900 for same townhome in Panama City, FL.
That $2300 is same amount as back in late 2022.
Same townhome rented for around $1500 in 2017.
Annual rent increases now are much smaller compared to period of 2018 to 2022.
https://www.zillow.com/rental-manager/market-trends/32407
Any predictions on the first debate?
This also includes the “wanna be renters”. Those that want to rent but can’t afford to as they don’t qualify. We’re in a short term rental while our new construction home is being built. We were advised that our monthly income must be a minimum of 3 times the rent. Due to the “cancel the rent” during the Covid lock downs landlords are stricter on who they will rent to. They want excellent credit, higher income and work stability.
Renters don’t tend to vote as much as homeowners.Renters also tend to be immigrants who are not citizens.
Look at it this way: your recent article analysing upcoming retirements of baby boomers over the next five years, combined with demographics surrounding births, virtually guarantees that job openings relative to unemployed persons can not “crater”, no matter how bad a recession we are in for.
The more likely point to anger renters is that the massive unparalled rate of (illegal) immigrants entering the country is pushing rent prices to the moon. Vacancies would be much higher otherwise.
JeffD,
Medium to large sized companies could downsize via attrition. They will not fill all those vacant spots left by retiring baby boomers.
My concern is the service worker glut in areas that are more immediate complex needs for me like HVAC techs, plumbers, electricians, car mechanics, and home repair (i.e., roof replacement, etc.).
Some things I rather contract out like change the blower for the HVAC and change out my hot water tank, whereas I can fix a sink leak, change out a bad electrode for a hot water tank, and fix a car power steering pump leak.
People have a lot of things to be angry about. Hopefully, rent pisses them off enough of them to vote. The deluge of bullshit during the last few years taken in total is barely surpassed by the biblical plagues.
I don’t think inflation will be the key factor. Second quarter unemployment will, unless the NY judge throws Trump in prison. Also, the millennial line on the graphic needs some siort of age adjustment.
not necessarily disagreeing with you, but i am quite convinced that another round of tangible/retail inflation is already in the queue.
and when (not if) inflation re-ignites – $3.25+/gal. gasoline, etc. – it will blot-out every other variable like an eclipse of the sun.
timing? soon. before Nov.
…right on queue – WTI spiking higher… $90/barrel oil coming… $4+/gal. coming…
oceans of liquidity chasing commodities = stubborn inflation.
retail demand (RE: recession) is almost meaningless when decades of cheap, greedy money decides to dump paper & buy tangibles (commodities).
I see the recent election results in Europe as as an analogy to Thatcher in 1979. I expect the analogy of 1980 to carry through in 2024 with Biden being Carter.
Not that Trump will fix anything. He recently told some CEOs that he will go easy on immigration.
“He recently told some CEOs that he will go easy on immigration.”
He meant legal immigration and work visas. Not illegals.
He’ll do whatever someone pays him to do.
Of course he’s probably going to jail at some point, so that might be in cigarettes he’s getting paid.
I bet you would enjoy being his bunk mate. Just a guess.
If the judge puts Trump in prison then NY will have a MASSIVE problem on where to put all the other prisoners in the prison they want to put Trump in. The Secret Service has 100% authority over the building/area wherever the President is. The Secret service can require NY to remove ALL other prisoners from the prison. The Secret Service does whatever it needs to do to protect the President. Where will NY put all these prisoners and what will be the cost?
Well luckily we have a record of his time in office to refer to.. he certainly did not let 10 million in in 3 years like dementia Joe did .. actually the spigots open wide Biden’s first day when he reversed all of Trump’s border protections with executive orders kind of funny talking about what people pay him to do.. you mean like Ukraine and China did bribing the Biden crime family? I certainly believe Trump has more concern for America then the left is tearing her apart..
Biden signed six different executive orders loosening immigration, on day one in office.
Yet Trump couldn’t sign one EO getting rid of the “dreamers” which wasn’t even the result of an EO but a declaration of Janet Napolitano.
I think Trump was held up by the federal courts in regards to the dreamers.
It was easy for him to force illegal immigrants to remain in Mexico, which Biden reversed on day 1 of his administration. That is why we have essentially have had an open border since Biden took office.
That’s as much of a problem as illegal immigration.
The illegals can be made “legal” by a voice vote in the middle of the night.
“He meant legal immigration and work visas. Not illegals.”
Since, like, you know, like, some 5 year planner, like, arbitrarily finding and deeming and reclassifying someone from, like, a, like baaad, like arbitrary category to, like, and goooood one is, like, the absolute high point of significance and all.
I totally get this but … at least a small caveat must be given to the fact that the cost difference between owning and renting is higher than it has been in decades (if not ever). This may have changed … but that was the case just 6 months ago. In my area … a new home in turnkey condition is at least $300K. If you put 10% down (not counting extra costs such as PMI) your PI is 1800 and your TaxIns would likely be about 350. Add in just 200 for maint and PM and you’re looking at 2350/month (plus if you borrowed for the $30K down payment and/or closing costs). That basic $300K house is lucky to get you $2000/month … so you’re in the red for $300/month if the wind is at your back.
Rent is normally 1% of home value or 3K a month on that 300K home. If you can only get 2K a month rent then it’s not a viable rental.
Actual home ownership of said home provides other monetary benefits (SALT deduction up to 10K, price appreciation, fixed mortgage cost vs rent increase) plus quality of life benefits (your home so you can do what you want in terms of remaking it to what you want/can afford).
People overspend on their own homes and blow tons of money on furnishings and appliances and other things that they don’t really need and often can’t afford.
As renters, if something breaks they have to fix it. And if you’re mobile, you can get TWO Months free rent right now in many places.
The people who are stuck as renters are families that don’t want to move their kids because of school. Singles and married couples with no children can take advantage of rent specials every two or three years and will get an 16% discount to move to a new place. Probably nicer than the previous one and with newer stuff.
2K x 12/m = $24K/y. 24K : $300K = 8% gross. Small landlords have tiny portfolios. If one tenant is delinquent 10%/30% of their portfolio can go to the recycle bin, becoming a nonperforming portfolio. Large landlord diversify. They are paying carpenters, painters, plumbers, electricians…wholesale. Small landlords are paying retail. It cost less to rent than own a house. Dealing with tenants in progressive cities can be difficult. Treating tenants with respect when times are good is a good insurance. It will protect when times are bad. Landlords that own several properties for decades have good income. In the flyover areas rent took off.
Treating someone well is always good business. I do this with contractors I like as well. I always pay immediately (especially if they take Zelle) and use them exclusively if possible. I am a small-fry but one big-business attribute I keep is wanting everyone to make money rather than squeezing every penny out of every transaction. Keeping a tenant an extra year is usually economically superior than doing a turnover and raising the rent. Eventually I get folks $500/month under market and that changes things … but I try to be each tenant’s best landlord ever … sometimes I get kicked in the teeth for that … most often it works well.
I’ve not seen many cases where that 1% is attainable .. except where I picked up a fixer and spent several months (and $50K) fixing it up. If you can pick up a turnkey starter home for $300K and get $3K/month renting it … that won’t last on the market for 2 hours.
According to Gavin Newsom : more people are working in junk food restaurants, earning the min wage or above, part time, but several chain stores already shut their doors. The $20/h don’t apply to other sectors. CA labor force might rotate to junk food restaurants from other sectors. Higher wages, free food.
People won’t be able to migrate to junk food. Now that it’s $20/hr … many are closing down, many more are automating and cutting staff. As I’ve mentioned before … eventually both California minimum wage earners could make $50/hr and it wouldn’t impact much.
There are still five job openings for every four unemployed. When that ratio flips, there will still be a historical excess of job openings in ratio to unemployed, as indicated by your own chart, and more clearly in the charts at the links below.
https://fred.stlouisfed.org/graph/?g=p9aA
https://www.bls.gov/charts/job-openings-and-labor-turnover/unemp-per-job-opening.htm
Do you seriously believe those openings?
Think there is a match of skills?
I agree there is a match of skills problem. That said, (legal) immigration takes care of most of the match of skills issue. On the job training can close the gap for some highly skilled, but ultimately repetitive jobs. For instance, running the same tests over and over in a medical lab, etc.
I’m sure you are aware of this.. and heck I may have even read it on your site here.. there are numerous ads on sites for jobs that really don’t exist and they’re not actively hiring for.. I don’t remember what the real purpose was behind this but it was demonstrated that we’re not legitimate postings actively seeking to hire..
This has been going on in Los Angeles for 25 years
Today’s elite and out of touch democrat party is unrecognizable to old school dems. They used to fight hard for the working class and the those in the inner city. Not any more. They are too busy kowtowing the universities and their woketard graduates.
VS the even older and more out of touch Republicans who are still sucking on the Teats of BIG OIL and BIG Legacy Corporations and trying to play towards Evangelicals???
Yeah, talk about out of touch!
The Dems sucking up to the Unions and Trial Lawyers aren’t any better.
Term Limits are needed and so is campaign finance reform.
Get the Octogenarians and Septuagenarians OUT of the Government and put in some people only allowed to serve TWO Terms and NO SuperPACs money!!
Dream on!
Most of the ‘news’ media and the Dem politicians use average numbers for their narratives. Most of the economic/financial gains are going to the top 1% of earners. The price of food, rent, gasoline and such does not affect the top earners. However, those costs are crushing many of those in the lower half of the income levels.
Another number that affects some people is that the average monthly payment for a new house has doubled since Biden got into office because of inflation on the mortgage rates combined with rising cost of housing.
The Republicans are even MORE out of touch. So what??
Neither party is doing a good job and both have crap on toast for candidates.
If I was a renter, I would be apoplectic.
The only illusion is that voters will have a choice that will improve their situation. Wrong! Any choice will do the bidding of the billionaires who back them, and they have no intention of lowering rents or rising wages. All they want is not to pay taxes.
I agree that it’s insane that “The BLS weighs rent at 7.61 percent of the CPI.”
I also believe a recession has begun.
One slight pushback though–a millenial home ownership rate of 51.5% seems quite healthy to me. I would have guessed significantly lower.
Make no mistake — (grand)mommy and (grand)daddy helped pay for a majority of those homes. How many are owned through inheritance, alone?
The Boomers are dropping like flies, much less Grandpa and grandma. There’s housing that will be coming available for the lucky ones that have their parents staying in their homes until they pass.
Was just on a Call with a friend and his Mom and Mother in Law are both in the same Elder Care Facility. Easier to visit them but it’s NOT cheap.
???
Boomers are living longer than any other generation.
They will drain 3 generations of wealth… and most of it will transfer to FedGuv, not heirs.
Resurrection, Jan 7, convicted felon, sex offender… If Trump survives Biden’s killing fire rent might dominate the Nov election..
Counting Friends & Family, and add in workplace & Social Networks, and you got to be well past the margin of error.
It’s over already if that’s the case, and it remains that way, IMO…
Inflation is the most despicable thing there is and FJB owns it.
Mostly true. It started with the Covid payments under Trump who also appointed Powell whom Biden reappointed.
Not remotely true. Ask any person in a country that’s under War or strife where they’re in physical danger of being bombed or shelled with artillery or forced out of their homes at gunpoint or literally starving or dying of very curable diseases with no medical care whatsoever and you’ll realize you don’t know what REAL problems are in the world.
Cheers!
I honestly don’t give a fuck.
Inflation? Because that scam has been going on for a long time not just since covid.. even at the feds targeted 2% which we all know is a laughable joke you lose 80% over 40 years.. I’ve heard inflation referred to as the silent thief of the middle class.. lately it’s been a screaming banshee as opposed to a silent Thief.. I’m not in the investor class just an over-educated blue collar worker but I’m out there on the streets and people are struggling with this absurd money printing
Plenty of worse things in the world. First world mentality Junior.
There’s WAY more bad things happening in many countries.
Well pretty bad here too.. 33 trillion in debt never even a thought of balancing a budget.. 10 million destitute foreigners invading Us in 3 years.. courting nuclear war in Europe.. up to our neck the current war in the Middle East.. our cities descending into Anarchy and chaos.. I think we got our fair share of bad things happening as we fall off our high horse and descend
A horde of renters stopped paying during covid. They spent the rent money on beer, cars, and cell phones. The landlord wants his money back. He needs to build a war chest for the next time Joe Biden declares rent amnesty.
Many of those renters don’t have cars. Who are these imaginary renters in your mind? They mostly live in or near cities. Walk, bike or ride public transit. They have jobs in many cases and are saddled with Student Loans in some cases.
Right the same loans that they voluntarily signed promissory notes for? I paid mine and never expected others to pay debts I promise to pay.. imagine what suckers those who work their way through college and we’re responsible and didn’t take out loans.. while some philosophy major took out 100,000 to go to Harvard using some of these proceeds for spring break and not work their way through now they don’t want to pay because the man has done them wrong… complete nonsense now you’ve made suckers out of those who sacrificed and scrimped and saved in favor of those who made really poor decisions on their major and job prospects
Biden declared rent amnesty?
I just ran the numbers, and where I live median income vs. price of rent equates to a whopping 50% of net income! And prices are continuing to rise.
So blacks aren’t goingto be placated by creating Juneteenth and then using it to spotlight transsexuals on the White House lawn while Kamala Harris creepily cackles?
Blacks using it to spotlight transsexuals? LOL…..Where to begin.?……
The whole transsexual thing being pushed is by white liberals and then anyone else that just wants to create more chaos in America.
Majority of African Americans are not for it, and black people from around the world 10 times more against it.
Apprarently you have never been around or close to many “black people”.
I think he was suggesting that POTUS and VPOTUS allowed their Trans puppetmasters to hijack JuneTeenth. Instead of being about blacks, theTrans folks stole it this year … and yes that is a very white phenomena.
I celebrate Juneteenth because that’s when the Rosenbergs got fried.
Oh man.. you’re on fire.. that was a different time for sure.. memory serves correct they were arrested convicted and as you say fried within a year.. too lazy to look it up after a long day at work but I believe I’m pretty close to correct.. that was a different America no 20 years of Appeals.. interestingly enough rosenberg’s Allegiance to America was secondary to their Jewish heritage they paid with their lives.. still executed even though we were one of Israel’s biggest supporters .. the thing to consider is how about these millions of illegals from all over the world we have taken in recently do you really think they care about America?
Based on the “undocumented individuals” in Colorado coming up with a long list of “demands” … I would say no. Additionally, if refugee Ilhan Omar is any indication … then no, they have no appreciation for anything American including America saving their lives. My son lives on Colorado. I informed him that I would be breaking into his house while he was at work, and when he got home, I could present him with my list of demands that he must meet to keep me happy.
I saw that and it first I was so disgusted.. still am but then I realized these indigents from all over the world did not write that List of Demands.. the ngos and the activists fingerprints were all over that nonsense but what absolute gall that list was.. truly unbelievable and how anyone on that side thought that would Garner sympathy for their cause is beyond me
Yes, that list of demands was definitely written by white liberals using taxpayer money in NGOs that transport immigrants up from the Darrien Gap, fastPaths them thru countries that used to have strict entry requirements … but now as long as they’re assured the folks will just be passing thru, they just take their cut (probably from the US taxpayer) and cover their eyes.
But, but … Ru Paul!
Yeah, they are definitely NOT voting for Don the Con. No matter how many times he tells you that he invented Juneteenth and is good friends with OJ Simpson.