On October 19, I noted the National Average Rent Declined for the First Time in Two Years.
- The national average rent went up by 3.2% in the past year but dipped by 0.1% month-over-month, reaching $1,471 in September according to data from Yardi Matrix.
- Apartment rates in a majority of small and large cities registered either minor decreases or stagnated.
- In more than half of the nation’s largest renter hubs rent prices waned since August.
Year-Over-Year Rent Cafe
I thought it might be instructive to compare Rent Cafe to the CPI measures, Owners Equivalent Rent, and Rent of Primary Residence.
The Rent Cafe provided me with a year-over-year spreadsheet and I downloaded the CPI data from Fred, the St. Louis Fed data repository.
The numbers are not directly comparable because they measure different things. But the exercise does show apartment prices are far more volatile.
OER: Owner's Equivalent Rent is rental of houses or Condos assuming one rented ones’ house from himself as bizarre as that sounds. Here is the actual question: “If someone were to rent your home today, how much do you think it would rent for monthly, unfurnished and without utilities?”
Rent of Primary Residence: Rent of primary residence measures non-owner occupied unfurnished apartments and houses without utilities.
National Average Rent: National rent is a weighted average of apartment rental prices. According to the Rent Cafe "We don’t make any distinction between furnished and unfurnished apartments or units with utilities included/not included. The share of furnished apartments or ones with utilities included is quite small."
Apartment rental prices are far more volatile than the cost of "renting one's house from oneself", the largest weight in the entire CPI.
Some will likely use this information to suggest buying a house is a good idea.
It might be if houses were not so damn expensive.
National Average Rent vs Hourly Earnings
Hourly earnings are from the BLS production and supervisory workers series and the all BLS workers series.
Housing Bubble Reblown
Pick Your Squeeze
- Renting a Home: Increases in National Average Rent have generally outpaced year-over year hourly earnings since 2011.
- Buying a House: House prices have risen far faster than earnings since 2012.
Compared to the price of rent or the price of buying a home, real wages have been in decline since 2011 or 2012.
Squeeze is On
Healthcare? Let's not go there if you buy your own insurance.
Mike "Mish" Shedlock