Giving Back: It's Not Always a Good Thing
In May, real rents continued to give back more of the gain they realized in the latter part of 2006, according to the latest Consumer Price Index (CPI) data. For the month, the residential rent component of the CPI advanced at a seasonally adjusted annual rate of 3.4%, while the overall CPI grew at a rate of 8.4% (the largest one-month increase since 2005).

As is often the case, the surge in inflation was driven by a spike in prices for petroleum-based energy products. Recent statements coming out of the Federal Reserve indicate that the Fed remains concerned about inflation, primarily because of tight labor markets and rising unit labor costs.

Based on seasonally adjusted Consumer Price Indices; U.S. Department of Labor, Bureau of Labor Statistics. The annual rates indicate what the percentage change would be if the current monthly rate were sustained over a 12-month period.The real rent index is the CPI for rent of primary residence divided by the CPI for all items and scaled so that January 1995 is 100.

The real rent index (which uses the CPI to adjust rent changes for overall inflation) slipped from 109.1 to 108.6 in May. The index had gained ground steadily in the months since last August, reaching a peak of 109.5 in January and February, before declining for three consecutive months. [ return to top ]