“Bubble Watch” digs into trends that may indicate economic and/or housing market troubles ahead.

Buzz: Tenants are feeling pinched as Southern California rent hikes grow at a pace not seen since 1985.

Source: My trusty spreadsheet analyzed a personal favorite benchmark for tracking what landlords are charging — the local Consumer Price Index’s “rent of primary residence” data. I looked at what you might call “momentum” — specifically, six-month changes in the 12-month rent inflation pace dating back to 1980.

The Trend

The CPI for Los Angeles and Orange counties shows rent expenses were growing at a 3.4% annual rate in January. That may seem modest, if not understated, but it is quite the jump from the 0.8% pace in the pandemic-iced economy of July 2020.

This 2.6 percentage-point surge in the rent-hike pace over six months hasn’t been seen since the crazy inflation days of the 1980s. There were just two instances of 3-point surges in rent hikes in a half-year: October 1985 (to 9.8% from 6.8%) and March 1980 (to 13.3% from 10.3%).

Remember, rent CPI comes from a survey of consumers asking how much they paid landlords, from mom-and-pop-owners with a few units to real estate giants with massive apartment complexes. And the CPI’s “what did you pay?” question includes the realities of annual rent renewals — typically smaller increases than what landlords demand from new tenants.

The Dissection

Quibble all you want about CPI methodology — much of the criticism comes from folks who sell competing data — but the six-month jump trend is an eye-opening bit of history.

By the way, it’s not just a local twist: the U.S. CPI’s rent index rose 1.9 percentage points to 3.8% in January from 1.9% in July. That’s the largest boost in the rent hikes since 1980!

It’s a shocking turn of events because when looking at the bottom of these same rankings — six-month periods with the biggest decline in rents hikes — the pandemic era is there, too.

Three of the 10 largest drops in the rent-hike pace since 1980 came in late 2020. Remember when as the economy was first digesting pandemic pain and vaccinations were still largely a dream?

October 2020 saw a 2.7-point drop (tied for No. 9 largest fall) to 1.8% annualized rent hikes from 4.5%; November 2020,  2.8-point drop (No. 8) — to 1.6% from 4.4%;  and December 2020,  2.7-point drop (also No. 9) — to 1.3% from 4%.

Consider how swiftly the cycle went from a chilled economy and job losses (no rent payments) to landlords prevented from evicting them (moratoriums) to a recovering economy with enough oomph to increase rents at a pace not seen in 37 years.

By the way, it’s not just a local twist: the U.S. rent index rose 1.9 percentage points to 3.8% in January from 1.9% in July. That’s the largest boost in the rent hikes since 1980!

How bubbly?

On a scale of zero bubbles (no bubble here) to five bubbles (five-alarm warning) … FIVE BUBBLES!

The pandemic era’s rent-hike turnabout — from historic lows to top of the charts — suggests there are many locals with good-paying jobs and/or cash to pay these higher rents.

At the same time, the big hikes raise a troubling question: What about the folks who are struggling to pay bills when we’re in an inflation spike we haven’t seen since the 1980s?