“Real” Rent Index Growth Accelerates in March as Core CPI Declines


In March, the real rent index increased 0.4 percent over February’s reading, after growing by approximately 0.1 percent per month for the previous 6 months (Figure 1). The annual growth rate of the real rent index grew to 5 percent in March, after 3 months of staying in the 1 percent range.

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 real rent index grew significantly in March, in part because of the decline in “core” CPI (which excludes food and energy from its calculations). Core CPI declined by 0.1 percent in March, the first monthly decline in the index since 2010. The decline is almost certainly related to the negative impact of the coronavirus on consumer demand. Although rents grew faster than core CPI in March, the impact of the coronavirus will likely put downward pressure on rent growth going forward.

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