NAA’s Inflation Tracker provides monthly analyses on various measures of inflation and their impacts on the economy.

1. A convergence of factors is leading to high inflation: Elevated demand for goods and services as the economy more fully reopens; supply chain bottlenecks across the world caused by these high levels of demand amid COVID disruptions in manufacturing and other industries; and a severe labor shortage.
2. The Federal Reserve maintains its position that much of the price pressures are caused by temporary, pandemic-induced factors and thus, will not persist long term. However, they do not expect inflation to trend downward until Q2 or Q3 of 2022.
3. As the inflation rate has risen above the Fed’s 2% target for the past six months as measured by the core Personal Consumption Expenditures Index, the Fed announced it will scale back its bond purchases beginning in November, which may lead to an increase in long-term interest rates.
4. The Fed has been clear that asset tapering does not signal any changes to interest rate policy, although most economists, analysts and “Fed watchers” expect at least two rate increases sometime in 2022, the timing of which is debatable.
5. In October, construction costs excluding capital investment, labor and imports for multifamily construction experienced their tenth consecutive month of double-digit year-over-year increases, as measured by the Producer Price Index.
6. In addition to wage inflation, apartment owners are feeling the pinch in items such as furniture, with prices increasing 12% over the past 12 months, and appliances, up 6.6%.
7. The real estate sector, and, multifamily in particular due to its shorter lease terms, is considered a good inflation hedge as rents can be raised in response to higher operating costs.
8. The Employment Cost Index (ECI) measures the costs of wages, salaries and benefits to employers and is considered a purer measure of labor costs than average hourly earnings. In Q3, the ECI surged 3.7% year-over-year, the highest increase since 2004.
9. Compared to total compensation for hotel and restaurant workers, which increased 7.4%, compensation in the broader real estate and rental and leasing sector (including all property types and all rental businesses, in addition to multifamily) increased a more modest 2.7%. It is important to note that this does not include incentive pay.  
10. In Q3 2021, the number of sign-on bonus offers mentioned in apartment job postings increased 4.5 times compared to Q3 2019. Advertised salaries for maintenance positions increased 10.5% over that same time frame.

Paula Munger is NAA’s AVP, Industry Research & Analysis.

Stay up to date on the impacts of inflation with NAA’s Inflation Tracker, available on naahq.org.