Welcome to this month’s edition! New data release this month shows that CPI rent inflation has almost returned to pre-Covid numbers. In other words, average rents across thecountry have been increasing at almost 9% year over year but now are increasing much closer to 4%. I’ll dive into my thoughts about what that means and what the future may hold.
The first thing to note is that the CPI rent inflation metric is notably lagged so although this was reported in February, it represents what has been happening in the months leading up to February. It seems safe to say that rent inflation will stay low in 2025 and probably most of 2026.
However, construction costs are still high which has significantly impacted the number of new construction starts in the past few years (although it’s getting better). This is almost certainly going to make the housing shortage worse and therefore create a housing shortage that increases house prices and rent prices.
Below I graphed the year over year percent increase or decrease in the total number of construction starts in Massachusetts, New Hampshire and the country.
To put this in context, if you look at the graph above, New Hampshire is performing the best at continuing to build more housing each year. However, in March of 2023, New Hampshire Housing released an assessment of the state’s housing needs. They found that the state needed 23,500 houses at the time of the report and that they would need 60,000 units to be built before 2030.
New Hampshire has been building about 4,000 units a year for the past 5 years. At these rates, New Hampshire will need 32,000 more units in 2030 to stabilize things if nothing changes.
Just my opinion, but all of this is to say that for thenext couple of years I think rents will increase at a “normal”level. A couple of years from now, I think we’ll see another spike in rent prices because there just won't be enough supply to keep up with demand.
As always, we’re looking for 3-50 unit properties in Southern New Hampshire. If you know if anyone looking to sell, we’d love to talk to them.