Keep in mind that the Bureau of Labor Statistics measures price increases of residential real estate owned via an econometric measure, Owners Equivalent Rent which tends to underestimate price moves. The BLS gives this measure an ~32% weighting in the "core" Consumer Price Index. For folks who rent their homes the BLS uses Rental of Primary Residence, again run through an econometric model but is more responsive to price.
RPR has an ~8% weight in the core CPI, giving housing a total of ~40%.
(something I've never understood is why, with around 1/3 of the population renting, RPR only 20% of the housing weight is rentals.)
With these measures rising and energy prices declining I would look for Professor Krugman to abandon core and begin using headline inflation (where housing has a total 32% weight) as his new preferred metric.
Here's a twofer, first up the Wall Street Journal:
Rents Increase as Vacancies Dry Up
Landlords boosted apartment rents to record levels in the second quarter as demand from tenants sitting out the home-buying market pushed vacancy rates to their lowest point in more than a decade, according to a report to be released Thursday.And from History Squared the nub of the argument (and the headline):
Despite the sluggish economy, average rents increased in all 82 markets tracked by Reis Inc., a real estate data firm. Average rents are now at record levels in 74 of those markets and now top $1,000 a month on average in 27 of them, including Miami, Seattle, San Diego, Chicago and Baltimore.
The biggest rent boost of the second quarter was in New York City, where the average rose to $2,935 per month, up 1.7% from the first quarter. Apartment rents also increased in markets that have been hard hit by the economic downturn such as Las Vegas and Phoenix, where they rose 0.9% and 1% respectively in the second quarter. The lowest average rent among the markets surveyed was Wichita, Kan., where the average was $510 a month.
"The market is in a very tight position," Reis said in a research report. "There is a paucity of available units."
The nation's vacancy rate fell during the quarter to 4.7%, its lowest level since the end of 2001, Reis said. That's down from 4.9% in the first quarter of this year and from 8% in 2009, when millions of would-be renters were doubling up or living with family....MORE
U.S. Real Estate is Booming; Inflation is Here
Since at least April, I’ve been tweeting how real estate has not just bottomed, but is booming. Check out these prices and supporting stats below the picture.
1. Rental yields are positive in 98 of 100 major markets...MORE, including a warning
2. Rental prices rose the most since 2007, with Manhattan rents up 7.1%.
3. Tom Shapiro of GTIS says his proprietary sales growth figures show 20% sales growth, adds government stats based on closings and lag
4. Wells Fargo boosted mortgage loans 30.1%(!) in 1Q, 33.9% of the $385 billion of mortgages originate $WFC ~ Bloomberg; BB&T 20%