The CPI Is Upside Down on Rent Growth

The recent CPI report showed a nominal decrease in inflation compared to last year, but its 0.5% monthly increase is a sign that the inflation cooldown is going to be a bumpy ride. While those following the apartment market are familiar with the roughly 1-year lag between market rent growth and CPI-measured rent growth, it is worth noting that the still-high rent growth numbers in the CPI are expected to come down considerably in the next few months. It remains to be seen whether the Federal Reserve will respond to these CPI numbers and the recent strong job growth figures with more aggressive rate hikes, but equally important is the question of how long these rates will stay high. The last time that the federal funds rate was this high (2006-2007), a full year elapsed before they were reduced, and multifamily investors—both buyers and sellers—may need to adjust their perspective to account for an era (hopefully no longer than 1 year) of higher rates.

Sources discussed in this episode:

Bureau of Labor Statistics: “Consumer Price Index, Jan. 2023”

Yardi Matrix: “National Multifamily Report, January 2023”

Redfin: “January 2023 Rental Report”

Moody’s Analytics: “Inclusionary Housing Policies Ramp Up Amidst Affordability Crisis”

TheRealDeal: "Everyone's a Genius in a Good Market"

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DISCLAIMERS: This podcast does not constitute professional financial advice and is for educational/entertainment purposes only. This podcast is not an offer to invest.