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REAL RENTS CONTINUE TO RISE

REAL RENTS CONTINUE TO RISE

In December, consumer prices increased by 0.3% on a seasonally adjusted month-over-month basis according to data released by the Bureau of Labor Statistics (BLS). Over the past twelve months, prices on expenditures made by urban consumers increased 1.5% before seasonal adjustments. Month-over-month increases in the shelter and energy were major drivers.The energy price index increased by 2.1% month-over-month after two months of decline. The gasoline index, a component of the energy price index, experienced a large month-over-month increase of 3.1%. The index for natural gas saw a decrease for the third straight month, dropping 0.4%.The Core CPI, which excludes more volatile food and energy prices, rose by 0.1% month-over-month. Over the past twelve months Core CPI increased by 1.7%.

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Shelter costs represent a large share of the average consumer’s expenditures. The shelter index rose 0.2% month-over-month in December after increasing 0.3% month-over-month in November. Over the past twelve months, the shelter index increased 2.5% before seasonal adjustments.

The increase in the shelter index partly reflects increases in rental prices. The BLS measure does not isolate the change in rental prices from the changes in the overall price index. NAHB constructs a real price index by deflating the price index for rent by the index for overall inflation. This measure indicates whether inflation in rents is faster or slower than general inflation and provides insight into the supply and demand conditions for rental housing, after controlling for overall inflation. When rents are rising faster (slower) than general inflation the real rent index rises (declines).

The real rent index has increased for eleven consecutive months. For the December data, the real rent index increased by 0.2% month-over-month and 1.1% over the past year.

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Source : National Association Of Home Builders

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