In June, the real rent index fell by approximately 0.1 percent. This is the first decline in the index since 2013 (Figure 1). The annual growth rate of the index fell to negative 1.4 percent, after posting three months of positive growth, at rates between 4 and 8 percent.
NAHB constructs a “real” rent index to indicate whether inflation in rents is faster or slower than overall inflation. It provides insight into the supply and demand conditions for rental housing. When inflation in rents is rising faster (slower) than overall inflation, the real rent index rises (declines). The real rent index is calculated by dividing the price index for rent by the core CPI (to exclude the volatile food and energy components).
The index decreased in June because rent inflation slowed while Core CPI grew by 0.2 percent. This is the first month Core CPI grew since February. The decline in the real rent index is likely related to the negative impact of the coronavirus on rental housing demand. Fallout from the virus has put downward pressure on demand in many sectors of the economy, including rental markets.