Real Rents Drop Slightly
In March, the real rent index—which adjusts changes in rent for inflation using Consumer Price Index (CPI) data—inched back down to the 108.8 level that has prevailed since November. Although the residential rent component of the CPI increased at a (seasonally annual) rate of 2.9% in March, it failed to keep pace with the overall CPI, which increased at a rate of 4.2% percent during the month.

The weakening homeownership rate, which has been edging downward for several years, implies increasing numbers of renters entering the market, which should put upward pressure on rents. But an important wild card in the process is the increasing number of foreclosed homeowner properties, which has generated a substantial stock of vacant units on the market. While their current owners are trying to sell these units (or holding them off the market waiting for prices to rise), many are likely to attempt renting them on a temporary basis, which tends to depress rents.

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. [ return to top ]