While wages are not keeping up with inflation, on the home front it’s much worse. Typical residential rents in the U.S. rose 0.6 percent in February, the largest single-month jump since 1987, the U.S. Labor Department reported.
The surge accounted for 40 percent of the month’s 0.4-percentage-point monthly gain in the core Consumer Price Index, which excludes food and energy.
“There’s still further strength to be seen,” economist Sarah House at Wells Fargo told Business Insider. “We don’t expect [rents] to peak until maybe the third quarter of this year.”
Rents are rising the most in major cities where rents plunged during the COVID War.
In Manhattan, apartment rents shot up by an all-time record rate last month, with tenants paying a median rent of $3,630 in February, 28 percent more than a year before, according to figures from appraisal firm Miller Samuel and brokerage Douglas Elliman.
Lease prices are 2.5 percent greater than the previous record, set in April 2020.
The number of vacant Manhattan apartments has fallen by 81 percent since the height of the COVID-era shutdown to just over 4,500 in February, the fewest for any February since 2008, the joint report said.
Almost 20 percent of new leases have sparked a bidding war, with prospective tenants offering hundreds of dollars a month more than the asked rent, the report noted, reversing 2020’s circumstance in which landlords were enticing tenants with temptations including months of free rent and allowances for redecorating.
Such concessions were included in only 20 percent of new leases, compared to a normal pre-COVID rate of 25 percent, Miller said.
Renters who signed discounted leases during the COVID War may see rent hikes of as much as 30 percent now that those leases are expiring and may not be able to afford to renew, Hal Gavzie, leasing manager at Douglas Elliman, said to Business Insider.
However, most tenants have renewed so far, largely because there are so few open apartments they could move to, he added.
“With the city relaxing COVID restrictions, and more office workers and students returning to in-person work and school, I expect demand to rise even further in the near term,” Gary Malin, CEO at broker Corcoran Group, said in a statement.
Demand likely will be sharpened even more in the months ahead: about 2,000 fewer apartments than the historical average are planned for Manhattan over the next several years, a Corcoran report noted.
Most of the new construction of condominiums targets the luxury market, forcing middle-income households to continue renting, heightening competition and pushing up rents in that market.
TRENDPOST: It continues: exorbitant rents squeeze low-and middle-income earners, leaving them unable to save enough not only to buy a home, but even just to be able to move to a better apartment.
With new construction catering to well-off tenants and buyers, there will be no increase in the number of flats affordable by middle-income households, forcing rents higher for those that exist.
TREND FORECAST: More broadly, the housing crunch will continue to be a key factor thinning out the middle class, reducing the U.S. to a society of a well-heeled minority and a majority that struggle harder and harder to survive.