Rising residential rents contributed to high inflation in August as real estate investors have increasingly looked toward multifamily buildings to generate revenue.
The annualized cost of renting a typical home jumped 6.7 percent in August, up from 6.1 percent in July, according to figures released Tuesday by the Labor Department.
The surging cost of shelter accounted for about 40 percent of last month’s cost of living increase, excluding energy, which fell in price, and food, which increased slightly.
The growth of so-called core inflation, which includes housing costs but not energy or food, rose at an annual rate of 6.3 percent in August, up from 5.9 percent in both June and July.
Equity markets declined sharply Tuesday, with the Dow Jones Industrial Average falling more than 1,200 points and the Nasdaq Composite Index down 5.2 percent at the closing bell, as sustained inflation increased the likelihood that the Federal Reserve would continue raising interest rates.
The pace of inflation cooled overall to 8.3 percent, down from 8.5 percent in July and 9.1 percent in June, the Labor Department said in its release.
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Rent increases varied dramatically across the country. In Miami, landlords asked 14.5 percent more in August than they did a year ago. The price hikes came despite some transplants feeling “Miami-ed out,” although some observers predict prices will soon fall.
Houston renters paid an average of 6.9 percent more last month than a year ago, Chicagoans paid 4.7 percent more, and New York and New Jersey tenants paid 2.8 percent more. The figures exclude the cost of energy and home furnishing.
While the pace of growth was slower in New York, rents did hit record highs. “I have never seen anything like this in the rental market,” said Hillary Barr of R New York in an interview Tuesday.
Housing markets in the U.S. can expect a boost in apartment construction, which can’t come soon enough given surging demand and rents. Apartment deliveries are approaching a 50-year high nationwide, according to a report by RentCafe.