In December, inflation-adjusted residential rents increased 0.1 percent over November’s reading, after essentially no growth in October and November (Figure 1). The average monthly growth rate of the real rent index stood at 0.11 percent in 2019, compared to 0.10 percent in 2018.
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).
In December, the index grew slightly faster than “core” CPI, which excludes food and energy from its calculations. A previous NAHB post shows that the CPI rose by 0.2 percent in December on a seasonally adjusted basis, while “core” CPI rose by about 0.1 percent during the same period.