Call Us: 240.462.3599

Apr-23: CPI Shelter and Market Data

12 May 2023

Matching Market Rental Data to​​ 

Apr-23 CPI Shelter Data


The BLS reported that CPI shelter increased year-over-year by 8.1% (Col 2 Table 1). The CPI rent indices (OER and Shelter) are lagging indicators of the market by about 12 months. Columns 3 and 4 show year-over-year rent appreciation for three-bedroom single family properties and apartments (all bedroom sizes) in multi-unit buildings.​​ 

A picture containing text, screenshot, number, font

Description automatically generated

Recognizing the long lag structure of Shelter based upon market data, CPI Shelter will slow but remain a major contributor to core CPI. This might require additional interest rate hikes by the Federal Reserve.​​ 

Anticipating Rent Inflation For The Second-Half of 2023

21 Apr 2023


Over the 12 months ending Mar-23, the Consumer Price Index (CPI) increased 5.0%; this was the smallest 12-month increase since the year ending May-21. Energy prices decreased 6.4% since Mar-22. Commodities rose by only 1.53%. The BLS also released its​​ core PCI inflation​​ number for Mar-23. Core CPI rose 5.6% from a year ago and is still above the Federal Reserve’s 2% target (see Table 1).​​


Description automatically generated

Other sections of the economy​, however, are​​ not slowing as fast as commodities. The U.S. rental market is still running too hot.​​​​ The BLS is​​ trying to measure monthly aggregate personal expenditures​​ on housing.​​ The BLS measures housing costs using its “cost of shelter”.​​ 

The CPI cost of shelter is essentially the sum of two components: The first, is a measure of the rents paid by apartment tenants in multi-unit structures for their primary residences. This measure is called CPI rent (or tenants’ rent). The second is an estimate of the rent that owner-occupied housing could command called Owners’ Equivalent Rent (OER). These measures tend to move together as the OER of a specific owner-occupied unit is estimated in part by observed actual rents on similar types of properties. Owner equivalent​​ rent, tenant’s rent and combined shelter represent 29.9​​ percent, 9.6 percent and a total 42​​ percent​​ of core CPI, respectively.​​ In Table 1, shelter increases by 8.18% in Feb-23.

Going forward, this high growth rate (above the 2% desired by the Federal Reserve) is likely to continue. Charts 1 through 3 show the problem.