US rents will increase 7.5% next year, the biggest jump since December, as the economy grows faster than anticipated.
The Bureau of Labor Statistics said Wednesday that rents for the median rent-controlled apartment increased 6.4% to $1,054, while for owner-occupied units, rents increased 2.4%.
The average monthly rent for the second quarter of 2017 was $1.15, up 4.3% from a year earlier.
“The economy is growing faster than we anticipated, and there is more room for the rental market to grow,” said Mark Kantrowitz, chief economist at First American Financial Group in New York.
The Fed’s monthly economic outlook for next year has also been revised down to a “gradual increase” of 0.3 percentage points.
The rise in rents will add to an already volatile rental market, where some apartments are being bought up to double their current rents.
A median rent for a one-bedroom apartment in Manhattan increased $10,000 to $852 a month in the third quarter, according to the Associated Press.
For apartments in San Francisco, rents jumped 15% to a median of $1.,621 a month.
The average monthly apartment rent for an owner-occupier in Los Angeles jumped 17.6% to about $1 of a month, while a two-bedroom in Houston was up 22.4%, to $2,846 a month.
“Renters are struggling, and they’re desperate for housing, but it’s still the best thing we can do for the economy,” said John P. Miller, chief executive of the nonprofit Bay Area Renters Federation.
“There’s no question that the economy is doing better than expected,” he added.
“We’re seeing an upturn in the number of Americans who are finding work, which helps to create more demand for housing and for the housing stock.”
The housing market has been buffeted by a massive housing bust, with thousands of new homes being built each month.
It’s not clear how much of that growth will be offset by inflation.