WHY TRUE INFLATION MAY BE LOWER THAN THE BLS IS REPORTING
BLS Housing Data Out Of Alignment With Market Data
- The BLS uses “Owners Equivalent Rent” to estimate what homeowners would pay in rent in their dwellings
- This survey rent data lags the market data observed by Zillow and RealPage by roughly a year
- This lag means CPI is being calculated with housing rent growth numbers over 5% in May 2024
Market Data Would Show Inflation Closer To 2%
- If the Zillow data for SFR costs are substituted in the CPI calculation, the inflation rate falls from 3.3% to 3.0%
- Going one step further, if RealPage traditional rent growth data is used in place of the BLS survey rent numbers as well, CPI would fall further to just 2.6%
Inflation Poised To Fall Quickly As Data Catches Up
- As the rent growth time lag plays out in 2024, it is likely inflation readings will approach the Fed target level of 2% quickly
- If 2% inflation is achieved it is likely the Federal Reserve will begin the process of reducing interest rates this year
*Through May
Sources: Marcus & Millichap Research Services, BLS, Zillow, RealPage, Inc.
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