JACKSONVILLE, FL – Many multifamily investors worry about the extreme spread between the Rent Consumer Price Index (CPI) and Average Hourly Earnings. While market conditions always fluctuate, it is troubling when the cost of housing, a basic necessity, rises faster than most people’s earnings. Data from the Bureau of Labor Statistics and Federal Reserve Economic Data shows that since 2008, median incomes have grown by 2.94% annually. In contrast, the average rental CPI has grown by 3.37% annually. This 0.43% annual difference has significant long-term implications.

Cumulative Impact Over Time

The 0.43% annual difference may not seem significant, but over 14 years, it adds up. Since 2008, Rent CPI has grown by 67.52%, while average hourly earnings have grown by only 56.98%. This creates a 10.54 percentage point gap. In 2022, this gap widened further. Rent costs spiked nearly 9%, compared to just over 4% for median wages. The chart below shows how much more rent CPI has grown compared to hourly earnings, highlighting the long-term economic strain on renters.

Spillover Effects of Macro

Rising rents compared to wages create a macroeconomic issue. More income goes toward rents, leaving less for other expenses. This situation signals a looming economic slowdown and a new economic realignment. Sectors like e-commerce, remote work technologies, and gig economy platforms will benefit. Households divert more of their budget toward housing. High housing costs in vibrant economic areas drive a move toward secondary cities and suburban areas. This shift could lead to balanced economic development and new investment opportunities.

Investment Strategy Insights

Understanding the growing divergence between Rent CPI and average hourly earnings is crucial for our investing partners. This information provides an analytic view. It identifies markets with resilient portfolios that can withstand trends. Our investment strategies respond to current conditions, moderate future risks, and capture new opportunities by continuously monitoring various data points.

Analyzing the divergence between Rent CPI and hourly earnings offers valuable economic insights. It provides a clear understanding of market dynamics that present challenges and opportunities. Our data-driven approach positions us to navigate these complex landscapes effectively.

As we continue to share insights on macroeconomic indicators, we aim to be your reliable partner. We provide smart and humane investment strategies. Staying informed about these trends helps us make decisions aligned with financial goals while being socially responsible. Awareness and responsiveness to economic changes place us in a strong position. We advise our investment partners and foster a balanced and sustainable housing market.

Explore the full article for deeper insights into this pivotal economic trend and strategic investment considerations.

About Nuvo Capital Partners

Nuvo Capital Partners is a niche market-focused multifamily private equity firm operating throughout the Southeastern United States. As a dedicated sponsor (General Partner), we specialize in institutional quality real estate investments within these regions. Our team, with a combined 25+ years of experience, has facilitated over $700M in transactions (10,000+ units). Delivering a transparent investment process, we provide our investors with access to high-quality real estate opportunities, while also ensuring integrity throughout. Our commitment extends to providing monthly, quarterly, and yearly in-depth reporting for our valued investors. To learn more, visit nuvocapitalpartners.com.

If you are interested in learning more about Nuvo Capital Partners and the investment opportunities we are currently exploring, please feel free to contact us here.