Rent Rise a Little, CPI Rises More, So Real Rent Index Falls

In July, NAHB's Real Rent Index (which adjusts changes in residential rents for overall inflation using CPI data from the Bureau of Labor Statistics) continued the downward trend it exhibited over the previous two months. During the month, the index declined by six tenths of a point, from 107.7 to 107.1. This follows on the heels of a seven-tenths decline in June and a half-point decline in May. The residential rent component of the CPI increased at a seasonally adjusted annual rate of 3.5% in July—in line with average monthly changes the market has seen thus far in 2008. 

However, the overall CPI again advanced at a double-digit annual rate. The real rent index is constructed so that it declines when the general price index rises faster than rents. Prior to the downward trend that began in May, the index had been marking time around 109.0 for a year and a half, with the 109.4 marks posted in both February and October of last year representing the all-time high.

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.