MultiFamily Market Outlook - 07/12/2004 (Plain Text Version)

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In this issue:
School-Age Children in Multifamily Homes? Very Few.
Starts Sink Below 300,000 — First Time in a Year
Real Rents Up — But Not by Much
Economic Forecast: Interest Rates to Move Slowly Upward
Multifamily Stock Index Hits New All-Time High

Real Rents Up — But Not by Much

Real rents continued to backslide in May. In nominal terms, the residential rent component of the Consumer Price Index (CPI) increased at an apparently healthy seasonally adjusted annual rate of 4.1% for the second month in a row. But the CPI for all items almost doubled that, increasing at a rate of 8%.

During the month, both food prices and energy prices soared. The increase in energy prices was led by petroleum-based products, and the increase in food prices was led by the dairy sector. In fact, it was the sharpest one-month increase in dairy prices since 1946.

With such a large change in the overall CPI, the real rent index (which adjusts residential rents for inflation) slipped from 107.8 to 107.4. The index has been in a general pattern of decline this year and has now fallen a full point off its December peak. At 107.4, the index is the lowest it's been since March of last year.