Economic Report: Rents are still growing much faster than wages, even as growth cools slightly

Americans’ cost of living is on the rise, but there may be some small relief in sight.

Rental costs rose by 3.6% for the twelve months ending in May, down a tick from April’s 3.7%, the Labor Department said Tuesday. As with all economic data that speaks for big nationwide trends, there’s a lot of variation under that headline. Yearly rent growth was 4.9% in Las Vegas – and flat in Chicago, according to real estate data firm Yardi.

So far in 2018, annual increases have averaged 3.7%, while in 2017, they averaged 3.8%.

The deceleration in rental costs stems most notably from developers building lots of new housing over the past few years.

Financier Sam Zell, speaking at a conference in New York in early June, pointed to “oversupply,” and suggested that real estate investors might soon find the multifamily market “less attractive” than in recent years.

But there are some skeptics. In April, Goldman Sachs economists estimated that what some analysts are calling a “supply glut” would be easily absorbed over the coming months owing to strong demand.

Read: That apartment building boom is slowing — so rent is about to accelerate

What’s more, it bears repeating that 3.6% rent growth — or 3.5% or 3.4%, for that matter — isn’t exactly cheery news for American consumers. That’s because wages aren’t keeping up. They rose 2.7% in the 12 months ending May, the Labor Department said earlier this month.

In fact, once inflation is factored in, wages haven’t budged over the past year. And as the Federal Reserve gets set to raise short-term interest rates yet again and global trade skirmishes threaten to boost prices of lots of consumer goods, it’s worth keeping in mind just how strapped American households are.

Also read: Mortgage rates reach seven-year high in a housing market reckoning

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