Yardi Matrix says February national average multifamily rent inflation was 15.3% y/y, 0.6% m/m. They survey thousands of rental communities in 140 US markets.
These numbers are based on market rent. This is the real inflation, not the BS the BLS uses for housing.
As you know from listening to me whine about it for 20 years, the BLS doesn’t count actual home prices. It would cost the government, and its corporate cronies, too much if it did.
It doesn’t count actual market rents.
It uses something called Owner’s Equivalent Rent, which is based on a yearly tenant rent survey, then adjusted monthly by what owners think their homes would rent for. As if they know.
The BLS annual survey asks tenants how much rent they are paying. That means contract rents, not the current rent in the market. Contract rents are always lower than market rent and move up more slowly. That’s because landlords factor in the frictional costs of tenant turnover. They would rather keep an existing tenant in place than incur even a month of vacancy, and incur the costs to refresh the unit for the next tenant. So they discount contract rent increases to keep existing tenants in place. In big cities with rent controls, contract rents are often tied to very low fixed rates of increase.
This has nothing to do with the actual price of rent in the market. Just like the BLS substituting hamburger for steak in CPI when prices are rising. It doesn’t tell us what inflation actually is.
The BLS constructs CPI specifically to minimize the increases in labor contracts, as well as government contracts, salaries, and benefits, such as to social security recipients. That’s why they took actual housing costs out in 1982. That’s why they use hedonic adjustments, substituting cheaper crap in the index when prices of more expensive stuff is rising too fast.
CPI does not measure general inflation. It never has and never will. It wasn’t built for that purpose
I think that the national rent index of inflation at 15.3% is a pretty good measure of actual annual inflation. As for the month to month, the 0.6% figure for February isn’t seasonally adjusted. Increases tend to be much higher in the months of March through September.
Unfortunately for the BLS those who believe that the CPI represents a meaningful inflation measure, the contract rent data that the BLS uses to suppress the CPI will come back to punch them in their faces, when rent inflation cools, because it will lag that cooling trend.
Stay tuned, inflation fans. The game is only in the middle innings.
