Latest / Wages and Prices with Fexingo: Cost of Living, Pay Raises, and Workers' Purchasing Power / How Your Raise Is Finally Outrunning Rent Prices
Transcript
- Lucas: So we've been talking for 49 episodes about how your raise is doing against everything from health care to energy to childcare. And honestly, a lot of those episodes had a kind of 'finally catching up' vibe. This one is different. Luna: Good different, I hope. Lucas: Good different. Because for the first time in a long time, your raise is actually outrunning rent. And I don't mean just barely. Let me give you the numbers. Average hourly earnings for private workers hit $37.50 in May, up from $37.41 the month before. That's about a 2.4 percent annualized increase over the past couple months. Meanwhile, the rent component of CPI — that's what the government tracks for what people are actually paying — has been rising at an annual pace of around 3.2 percent. Luna: So rent is still rising faster than wages. That doesn't sound like outrunning. Lucas: Fair point. But here's the thing — that 3.2 percent rent increase is the slowest in years. And if you look at median usual weekly earnings, which is a broader measure, that number hit $1,204 as of early 2025, up from $1,159. That's a 3.9 percent annual gain. So on that measure, wages are clearly ahead. And even on the hourly measure, the gap is closing fast. A year ago, rent was rising at 5 percent. Two years ago, it was 8 percent. The trajectory matters. Luna: Okay, so what changed? Why is rent finally slowing? Lucas: It's mostly supply. We've had a massive wave of multifamily construction over the past three years. A lot of those projects are just now coming online. In cities like Austin, Phoenix, and Nashville — the Sun Belt boom towns — there's actually an oversupply of apartments in some submarkets. Landlords are offering concessions again. One month free, waived fees, that kind of thing. Luna: So for someone living in one of those cities, their rent might actually be flat or even down a bit year over year. Lucas: Exactly. And that's what's pulling the national average down. Now, if you're in the Northeast or parts of the West Coast, you're not seeing that same relief. In New York or Boston, rents are still rising 4 to 5 percent. But the national picture is being dragged lower by the high-growth markets that got overbuilt. Luna: So the raise is finally winning — but only if you live in the right place. Lucas: That's the nuance, yeah. But here's the broader point: for the typical worker, the share of their income going to rent has been climbing for years. It peaked at around 31 percent in 2023. This year, it's closer to 29.5. That might not sound like much, but for a family earning the median weekly wage of $1,204, that's about $90 more in their pocket each month after paying rent. Luna: And that extra $90 is real money. It's not getting eaten by rent anymore. Lucas: Right. And it's happening against a backdrop where overall inflation is still elevated — CPI was up 4.2 percent annually in May, the highest in three years. So the fact that rent is actually becoming less of a burden is a big deal. Rent is the single largest monthly expense for most people. Luna: But can this last? I mean, construction starts have slowed. Interest rates are still high. Developers are pulling back. Lucas: That's the million-dollar question. New multifamily starts are down about 20 percent from the peak in 2024. So the supply wave is cresting. Within another year or two, we could see rent growth reaccelerate if demand stays strong. But for now, the window is open. And for workers who have been getting raises of 3 to 4 percent, that window is giving them a real boost in purchasing power. Luna: So the takeaway for our listeners: if you're renting and you haven't checked what similar units are going for in your building or neighborhood, it might be worth doing. You might be able to negotiate a lower renewal. Lucas: Absolutely. Landlords are more flexible now than they've been in years. And that's a direct result of the market shifting. It's a good moment to be a renter. And it's a good moment to see your raise actually do what it's supposed to do — improve your standard of living. Luna: Speaking of the show helping people understand their money — Lucas, we've been doing this for 50 episodes now. And it's all ad-free, listener-supported. A handful of folks chip in monthly on Buy Me a Coffee dot com slash fexingo, and that's literally what keeps us going. No ads, no sponsors, just people who find this useful. Lucas: Yeah, and we're really grateful for that. It means we can keep drilling into topics like this without having to sell anything. If walking through the economy with us has made something click for you, that's the whole point. So thank you to everyone who's already part of that. Luna: Alright, back to the numbers. So we've established that rent is becoming less of a drag. But what about homeownership? Because for people trying to buy, the picture is completely different. Lucas: Totally different. Mortgage rates are still above 6.5 percent, and home prices are still near all-time highs. So the rent vs buy math is tilted heavily toward renting right now. In many markets, the monthly cost of owning is 30 to 40 percent higher than renting a comparable place. That's a huge gap. Luna: So even with rents rising slower, buying a home is out of reach for a lot of people. That keeps demand in the rental market high. Lucas: Exactly. So the relief we're seeing in rents is real, but it's fragile. If the job market stays strong and incomes keep rising, we could see a virtuous cycle: more people able to save, maybe eventually put a down payment together, and that would ease rental demand further. But if rates stay high and supply dries up, we could be back where we started in a couple years. Luna: So enjoy it while it lasts, but don't count on it forever. Lucas: That's the honest take. For now, your raise is finally outrunning rent. That's worth celebrating — and worth paying attention to. Next episode, we'll look at what happens when that extra cash hits the economy. Does it get saved, spent, or swallowed by something else? Luna: See you then.