The WSJ’s Nick Timiraos wrote on the weekend about the puzzle around rent inflation, which is one-third of the CPI. It’s stuck at 5.6% y/y and keeping overall inflation high.
That number comes from a survey of 7000 tenants and synthesizes what a homeowner would pay to rent their own home. It is primarily shaped by “continuing leases” signed many months earlier, while the same units are only surveyed every six months. Adding a lag into the component is that rental extension agreements are typically signed 2-3 months in advance.
All this adds to the confusion about rental inflation. Most think it’s just a matter of time before lower rents impact inflation, but some worry that surprisingly-high demand and solid wage growth will keep rents high.
Most-convincing is this chart: Which highlights that the CPI rent number is currently higher than any of the private measures of rent.