Energy, Food and Multifamily Rents

Energy, Food and Multifamily Rents

Energy, food and multifamily rents are all higher now than in 2001.  But how much higher?  Whereas food tends to fluctuate, fuel and rents, people believe, only go up.  Is this true?  Let's look at some recent trends.

Energy.  The average price of a gallon of gasoline in May 2001 was $1.66.  In May of 2011 it was $3.78.  This represents an average annual increase of 8.26% each year (every year for ten years).  In the last twenty years the price of a barrel of oil has fluctuated from as low as $10 to as high as $140.  Today it's $97 per barrel, continuing outside of the historic $35-$75 per barrel range. 

Food.  According to the Guardian, the Food Price Index in May of 2001 was 94.  In May of 2011 it was 232.2.  This represents an annual increase of 9.08% each year (every year for ten years).  The costs of food production is also heavily tied to the price of energy.  All along the food chain energy is expended for production- from planting through harvesting and delivery to the end users

Rents.  According to the U.S. Department of Commerce, rents have increased only one percentage point each year for the last ten years.  The average cost of a two-bedroom apartment in Denver in May of 2001 was $832.  In May 2011 it was $1,007.  This represents an annual increase of 1.91%  each year. 

Interesting.  While Energy and Food have approached double digit annual growth for a decade, rents (while having fluctuated)  increased only 2%.  Granted, this is a micro example having depicted only a single city.   Like politics, all rents are local.  San Francisco and Boston are higher, Detroit and Dayton, lower.

So the answer is yes; all categories have increased in absolute dollars over the past ten years.  However, rents gained the least amount in the examples presented here.

This will not hold.  Rents are poised to increase with the convergence of  low construction starts and population gains.  Rents may not gain at the same pace as energy and food, however, but I predict a repeat of this exercise ten years from now will reflect rental increases significantly higher than those represented in the last decade.  Starting in 2011.

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