Jun-23: Rent Inflation and Market Data

30 Jun 2023


Over the 12 months ending May-23, the Consumer Price Index (CPI) increased 4.0%. The energy index decreased 11.7% and commodities rose by only 2.0%. Core CPI rose 5.3% from a year ago (Table 1) and is still above the Federal Reserve’s 2% target.​​

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Other sections of the economy​, however, are​​ not slowing as fast as energy and 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 2,​​ we see that​​ shelter increased​​ by 8.05% in May-23.

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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.