Inflation Remains Tame, Rents Flat From a Year Ago


The Bureau of Labor Statistics (BLS) released August Consumer Price Index (CPI) numbers today. The CPI for All Urban Consumers rose 0.3% in August, matching July’s increase. On a year-over-year basis the index was up 1.1%.

Most of the increase came from higher energy prices, with the CPI for energy rising 2.3%, its second monthly increase following three months of decline. In July, energy prices rose 2.6% and are now up 3.8% from August 2009. Core CPI, which excludes food and energy prices, was essentially flat for the month, and up a modest 0.9% from a year earlier.

The rental component of the CPI fell slightly, down 0.1%, only its second decline for the year. On a year-over-year basis it was flat. Owner’s equivalent rent, which is largely driven by the rent index without utilities and can be used as a measure of homeownership “prices”, was essentially flat, but was down 0.7% from a year earlier.

The rent and owner components of the CPI make up 31% of the CPI. The soft rental market and excess vacancies have kept rents from rising, which has been a challenge to apartment owners who have seen other costs rising. It also has made it more difficult for multifamily projects to obtain financing.

However, there are early signs that the rental market may be improving. The rentership rate—the percentage of households renting—has risen each of the past three quarters. Meanwhile, the rental vacancy rate on new construction improved in the second quarter while it held steady on older apartments.

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