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Rent: Yet another inflation scare story ruined by the facts

Am I nuts? Of course I am. More specifically, am I nuts to think that the Bureau of Labor Statistics has a good handle on how much prices are rising? Here's the Washington Post today:

Rents are starting to surge in many parts of the country as the economy reopens and young people return rapidly to cities....Nationwide, rent prices are up 7.5 percent so far this year, three times higher than normal, according to data from Apartments.com. Analysts expect rent prices to keep climbing for the foreseeable future, a major burden for renters and a warning sign that higher inflation could linger far longer than the White House and Federal Reserve keep predicting.

This actually seems plausible. And yet, here are the BLS numbers:

Not only have rents not risen 7.5% so far this year, BLS says they've risen a paltry 0.5% in big cities and less than 1% in midsize cities since January. And rent growth has been falling steadily for over a year. Compared to 12 months ago, rent is up a very modest 1.2% in big cities and 2.6% in midsize cities.¹

In other words, for most people rent is a bright spot. It's one of the slowest growing major expenses out there.

So what's with the Post? It turns out to be an old story. First off, they ignore the BLS numbers completely. I don't know why. Maybe it ruins their story. Second, if the local numbers from Zillow are to be believed, rents are spiking only in a handful of hot midsize cities: Stockton, Phoenix, Fresno, Boise City, and a few others. Rents are down in places like Seattle, New York, and San Francisco.

But guess what? Rents are always spiking in a handful of hot cities. The only thing that changes is which cities happen to be hot. If the Post wants to write a story about which cities have lost their luster and which cities have gained, that's fine. But this headline is just plain wrong:

Rent prices are soaring as Americans flock back to cities

Readers shouldn't have to plow through ten paragraphs to find out that this applies only to "more than a dozen cities," which is about 1% of all the cities in the United States. In the other 99%, rent is fine. Come on, folks.

¹We'll get new inflation numbers through June in a few days. Maybe they'll show a huge spike in rents! But I doubt it.

26 thoughts on “Rent: Yet another inflation scare story ruined by the facts

  1. catnhat7

    The aforementioned chart likely suffers from a few measurement challenges:

    1. Rent concessions. Many landlords proposed/accepted, on a temporary basis reduced rent: is the return to the list rent a rent increase?

    2. Evictions and government programs. Similar to point number one above, some tenants were paying partial (unlike above the landlord did not agree to accept partial payment) or not paying rent. Now these legal limits are changing. How does the data incorporate this dynamic?

    3. Migration to the burbs. COVID resulted is a decrease demand in many cities with a commensurate increase in demand in these cities suburbs. Thus, for example, rent is down in San Francisco but up in many bay area suburbs. How does the chart capture this complexity?

    1. catnhat7

      Sorry I discovered I can't edit my post. My broader point, depending on how one gathers the data you could find both apartments.com and the BLS statistics.

      - For example, if Apartments.com asked people how has your rent changed over the last year: the respondent answers accurately that rental payment went from X to Y, without consideration that during COVID they were receiving a rent reduction.

      - - Similarly the movement for renters from cities to burbs, more space etc, was real. Thus, the rent in historic apartment could be flat, or even down, but the renter is paying more in the burbs.

  2. D_Ohrk_E1

    Monthly rate of change of index of rents and core CPI: https://bityl.co/7lyi

    Yes, rents are starting to climb faster now than during the middle of the pandemic. But, it's still not as fast as it was just prior to the pandemic-induced recession and it's not wild like core CPI is.

  3. rational thought

    Looking at the chart, if I am reading it correct, what strikes me is

    A) over recent history before the pandemic, rents seemed to consistently be going up a bit more than other non food and energy prices. So a return to "normal ", we should expect to see rents rising a bit faster than other price.

    B) however, that could be reversed if inflation is taking off, as rent increases are slowed by leases and rent control ( set before expectation of high inflation).
    So a period of rent increases lower than other CPi could actually be bad news as an indicator of real inflation.

    C) obviously the pandemic caused huge disruptions resulting in wide swings of prices. And it takes a while for the free market to adjust to the right level.
    And the current scary inflation numbers might be and probably are some real underlying higher inflation ( which should be expected with extra money supply and stimulus). But they can also be partially caused by a continuing catchup in prices distorted low by earlier pandemic. Maybe we had higher underlying inflation through 2020 partially disguised by distortions and only now are prices catching up. Maybe today's numbers are half true current inflation and half delayed 2020 inflation.

    D) and for rents obviously the eviction moratorium caused a big distortion but we will not be able to figure it out until some time after it expires and things settle down.

    So underlying theme to me in all this inflation talk is it is just too early to know what is happening especially with regard to a few unusual months.

    Maybe we are in for some 70s style inflation. Maybe even weimar Germany. And maybe we will settle back down to low inflation again by end of year. I do not know and I doubt anyone really does.

  4. MontyTheClipArtMongoose

    Inflation : the Lamestream Media reporting on the Biden-Harris regime :: Fetch : Mean Girls.

  5. thefxc1616

    In my area (mid-sized midwestern city):

    1) a number of hotels that went bust during the pandemic converted into apartments, generally on the lower end of the rent scale

    2) According to a former landlord of mine, a lot of tenants downsized early in the pandemic, moving to cheaper units. Because of this there's an unusually low vacancy rate for low-cost apartments

    3) and yet the prices of mid-price apartments seems to have gone up fairly substantially, $70-100/mo more than at the beginning of the pandemic. Also unusually low vacancy rates.

    Not sure what explains any of this. Maybe look at # of new rental units added? Is it possible low-cost housing is getting cheaper while mid/high end housing is increasing?

    1. rational thought

      Are we taking about the average rent for all units or the average amount to rent a new unit? I wonder if some landlords, especially if maybe they rent one unit in a duplex and occupy the other, are holding some units vacant until they see the eviction moratorium gone. Because they are scared of getting a tenant they cannot evict.

      Is there a larger than normal gap between new rents and average rent?

      But, just like a lot of things, hard to see where we end up until things get back to normal. Especially rental units due to eviction moratorium.

      1. jakejjj

        I own a condo in a "progressive" city and live 100 miles away. The "progressives" passed rent control and dictated an eviction mortorium, which they've extended. So the the condo sits vacant, and will continue to. It seems that "progressives" want people to be homeless, and who am I to argue? LOL

  6. bbleh

    Dammit, Kevin, you must Respect the Narrative! Inflation Monster is coming to EET US IN OUR BEDS! and That. Is. That.

    I swear, if you don’t get in line, as much as I don’t want it to happen, you are going to LOSE your damn JOB at this blog, and … wait … what?

  7. cmayo

    What happens if you remove NYC from the "large cities" bit? During the pandemic, they actually saw rents decline by a substantial amount.

    By contrast, down here in the DC area, rents stayed stable/on trend for the most part - there are just far fewer people here than in NYC, which I suspect is skewing that "big cities" line a lot lower than it is in the rest of the "big cities."

  8. Dana Decker

    Whoa!

    Kevin routinely says to chill because overall inflation is 2%, but rents over a five year period have increased near 4% annually for big cities and 3% for midsize cities. It's in the chart.

    Yet he writes: "In other words, for most people rent is a bright spot. It's one of the slowest growing major expenses out there."

    It wasn't a bright spot prior to COVID.

    Looking at only the last 12 months and declaring rent increases nothing to worry about is absurd. Kevin has been quick to dismiss other COVID-era economic statistics as unrepresentative of general trends, yet here he plants his 1.2% flag on top of the mountain. Why?

    But let's assume Kevin is right about inflation - for now. When inflation does hit, what's his solution to make whole those who have lost financially? The answer is that *there is no way*, which means you have to err on the side of inflation-alarmist. Prevent it from taking off, which means dampening other economic metrics. That's a trade-off I support.

    1. colbatguano

      Efforts to reduce inflation will have little effect on rents, but large effects on people trying to find jobs or get raises. Keeping inflation low helps investors not working people who rent.

      1. jakejjj

        "Little effect on rents," said the "progressive" whose Gender Studies degree (with a minor in Queer Theory) didn't include Econ 101, because it's racist, not to mention too hard. LOL

  9. Vog46

    "rent" is driven not by market forces but by how the landlord or rental companies use those market forces.
    If you are living in a 60s or 70s apartment building here you are paying the same rent as a person living in a new building. Why? Well the rental team does market surveys. What is paid, what amenities are provided location.
    The management team does NOT Take into account anything OTHER than current pricing. The computer system filters out just about everything else. So that person paying $2700/month using old appliances, in inefficient buildings, are within a few dollars of those in newer buildings.
    It's like hotel rates. It's what the market will bear.

    1. jakejjj

      You obviously have never been a landlord, but like every other laughably ignorant "progressive," that won't keep you from delivering a hilariously brain-dead lecture. It's what you and your kind do. LOL

  10. jakejjj

    During my 40 years as a straight-ticket Democrat, I would remind myself that they had a brain trust in back of the curtain. That began to wither after the mid-'90s, and now it's gone. This laughably ignorant post illustrates the entropy that has seized your kind.

    You operate in a bubble. listening only to the voices inside your heads. Kevin Drum flunked Econ 101. Hey, I get it. Economics is on the tough side to begin with, and the violence (figuratively speaking) done by the academics has added needless complexity. Still, if you're going to write about it, I think it's better not to be the punch line to a joke.

    Drum, you moron, inflation doesn't usually happen all at once. It creeps in on cat's paws. Apparently, you are too lazy and/or stupid to see what's happened with food, fuel, and house prices. After all, when you are Marie Antoinette, who cares that diesel is up 80% since Xiden was "elected." You don't pay attention to grocery prices (mushrooms +20% at the local store) because you have never had to make hard choices.

    So keep b.s.-ing yourself. Pay no attention to General Mills's announcement that it will raise cereal prices by 7%. Only the deplorables eat Cheerios. Do you even realize just how disconnected you are? Nope, you don't. You've got yours. Let 'em eat cake. Oh boy, are you people ever in for some hard lessons.

    1. JonF311

      For most of my adult life "Inflation!" has been cried like a mantra by the Green Eyeshades set. They even did so in the depths of the Great Recession when prices were falling like rocks. May this time it's different-- but I'm not holding my breath.

    2. colbatguano

      Nice cherry picking. Please tell me how government policies control the price of diesel. Not that you really care about inflation except as a cudgel to beat up Democrats.

      1. jakejjj

        Xiden and you "progressives" are bent on reducing supply. Cancel pipelines and drilling. You want to further impoverish people who work for a living, because you're rich Democrats who hate this country's guts, and despise the common American.

        But there's some very good news where I live. It seems that California is running short of power. I am personally acquainted with an executive of a very large generation outfit. They produce for 4 cents/kWh and are selling to California at 22 cents.

        Want to be stupid and smug? Great! It's gonna cost ya. LOL

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