Rental Vacancies at 23-Year Highs, Yet Official CPI Shows Rent Increases

U.S. apartment vacancies are a 23-year high (see report). The reason given is the downturn in the economy. Since many homebuyers have been forced out of their homes (or should have been), presumably they would have moved back into rentals. If this is not actually happening according to this report, then where are these people? Did they move back with their parents?

Anyway, the problem is that the Bureau of Labor Statistics (BLS) report for inflation in September 2009 showed the rent index was unchanged and the index for owners’equivalent rent increased +0.1%. In fact, BLS says first half 2009 compared with 2008 saw an increase of 3.1 %. The rent or "owner's equivalent rent" is a very significant part of the CPI. If the rent number is phoney, then we should have had deflation proven for last month.

"Rent of primary residence (rent) and Owners' equivalent rent of primary residence (rental equivalence) are the two main shelter components of the Consumer Price Index (CPI).Rental equivalence". Owner's equivalent rent is the largest component of the CPI at 23.83%. This plus rent of primary residence make up 29.96% of the CPI.

Mish from Global Economics recently har an article on this subject. He says "Given that OER and rent make up 29.96% of the CPI, the Year-Over-Year CPI is massively overstated at -1.5%. The BLS is once again in the twilight zone".