Rents were not falling as reported recently by Apartment List. Nor are Apt List estimates correct now. Let’s discuss what’s really happening and why Truflation is wrong as well. 
Please consider the Apartment List National Rent Report for May (April Data).
Welcome to the May 2024 Apartment List National Rent Report. Rent prices ticked up for the third straight month, but rent growth remains modest, signaling ongoing sluggishness in the market. The national median rent increased by 0.5% in April and now stands at $1,396,1 but the pace of growth slowed slightly compared to last month. This is typically the time of year when rent growth is accelerating heading into the busy moving season, so the fact that growth stalled this month could be a sign that the market is headed for another slow summer.
Two Huge Problems
- Apartment List Data is not Seasonally Adjusted
- Apartment List Data reflects new leases only, about 9 percent of the market.
Last month, I noted Apartment List Reports Rent Prices Increase for the Second Month
Apartment List says the national price of rent is up for the second month after declining for six straight months. The measures are useful but only if you understand how best to use the report.
Apartment List said “For the last two years seasonal declines have been steeper than usual and seasonal increases have been milder. As a result, year-over-year rent growth dipped into negative territory last summer and has remained there since, currently sitting at -0.8 percent. In other words, as the market has cooled, apartments are on average slightly cheaper today than they were one year ago.”
I replied “Let’s stop right there because they aren’t.“
I have covered this before, and Apartment List admits the problems.
Please consider the Apartment List April 8 report Report Rent CPI Remains Elevated Even as Rents for New Leases Dip
The difference between our index and the rent component of CPI reflects the fact that the two indexes are designed to measure different concepts. The Apartment List rent index measures composition-controlled price changes for new leases, while the CPI tracks rent changes across all households. Since only a small share of households sign a new lease in any given month, it takes time for changes in market-rate asking rents to filter through to the entire market.
In addition, there is the visually obvious seasonal adjustment issue.
Would You Believe?
Would you believe believe year-over year inflation is barely over two percent? That’s the Truflation claim as of April 17, 2024.
Truflation Replicates and Compounds the Apartment List Error
Truflation uses Zillow, Trulia, Redfin, Apartment List and CoreLogic. It claims “Our methodology for calculating rental price changes incorporates both new rental agreements and rental renewals, which provides us with a balanced view of price changes over time.”
But Zillow, Redfin, and Apartment List all have a huge flaw. They only capture new leases when only about 9 percent of the people move each year.
Zillow uses asking rents not actual rents.
Truflation says “The BLS includes any government subsidies paid to the landlord in the total cost of the rent, which is also likely to skew the data to the upside.”
Apparently, if the government is picking up the tab, then the price increase is zero.
Truflation assigns a relative importance to housing of 23.2 percent whereas the CPI assigns a current weight of 36.2 percent.
Neither Truflation, nor the CPI, nor the PCE (the Fed’s favorite measure of inflation count home prices in their equation.
Zori Headed Back Up
Amusingly, Zillow measure (ZORI) has turned back up.
Home Prices Hit New Record High, Don’t Worry, It’s Not Inflation
The Case-Shiller national home price index hit a new high in February. That’s the latest data. Economists don’t count this as inflation.
Not Inflation?!
Economists, including the Fed, consider homes a capital expense, not a consumer expense.
As a result, they all ignore economic bubbles and blatantly obvious inflation on grounds it’s not consumer inflation. This has gotten the Fed into trouble at least three times. The first was the dot-com bubble, then the Great Recession housing bubble and now.
It’s pathetic when you make the same major mistake over and over and over. It’s a result of groupthink.
For discussion, please see Home Prices Hit New Record High, Don’t Worry, It’s Not Inflation
Truflation repeats and compounds economic groupthink that housing prices just don’t matter.
Truflation Weighing
The above chart is from Truflation Methodology.
I contacted Numbeo and received this comment “Most of it crowdsourced. For rent pricing in USA approximately 100 [observations] per month. I think that for rental data Fred, Zillow, are more reliable, while our section for Restaurant and Food prices could be of more interest (for USA).”
I assume Truflation does not use Numbeo which has a mere 100 observations. I do wonder if at one time Truflation did attempt to crowdsource rent, a serious mistake.
Regardless, the Truflation example is interesting, and very flawed. Zillow, Apartment List, and Redfin, all have the same serious issues (with Apartment List having an additional seasonal adjustment issue).
If Truflation does assign Apartment List, Zillow, and Redfin 20 percent each as does their example, it is assigning a combined weight of 60% to something that should have a combined total weight of roughly 9-10 percent!
Truflation should average all the flawed measures and give them a combined weight of say 9 percent not give each of many seriously flawed measures equal weights.
Perhaps the string of 31 months of 0.4 percent month-over-month increases ends this month. But that is no vindication for those making that claim for two years.
Yes, rent is lagging. But using Apartment List and Zillow as a better measure is a bigger mistake in the opposite direction!
Apartment List at least serves a clientele, those looking to move.
Truflation Claims Inflation is 2.06 Percent, Anyone Believe That?
On April 20, I asked Truflation Claims Inflation is 2.06 Percent, Anyone Believe That?
A Better Measure of Inflation?
Truflation wants to be a better measure of inflation. It isn’t. In attempting to fix some issues, it introduced others.
And it ignores the big elephant by insisting rising home prices have no part of inflation.
The 34 percent of the nation who rents would laugh at Truflation percentage weight of rent at 8.1 percent with a strangely calculated OER at 13.8 percent.
Inflation matters, not just misguided attempts to measure perceived consumer inflation.
We don’t need a more timely CPI which is all Truflation purports to be (but isn’t because it introduces other serious weight and methodology biases).
We have a huge housing mess because hardly anyone recognizes home prices as part of the inflation problem. Truflation increases the awareness problem.
Comment From John Burns
I asked John Burns, CEO of John Burns Research and Consulting, LLC “What do you make of reports that rents are falling or soon will?
He replied “Rents are falling in some of the markets below, and rising elsewhere.”
The list where “some” but not all are falling includes Charlotte, Austin, Raleigh, Phoenix, Nashville, Charleston, Salt Lake, Jacksonville, Denver, and Dallas,
The CPI report is on Wednesday. Month-over-month rent has risen at least 0.4 percent for 31 consecutive months. Perhaps this breaks the spell.
Since most leases renew May-September, it’s possible there is minimal or no abatement of the primary trend until then. Meanwhile, we have heard rent is falling or soon will for two years running.
The Fed’s Big Problem
As I have commented several times, The Fed’s Big Problem, There Are Two Economies But Only One Interest Rate
At this point we appear to be stuck. There is no magic answer to solve the Fed’s dilemma.
And if you have a lot of faith in Zillow or Apartment list, rent is rising again.
Rental prices are created on what it costs to buy a home. Landlords follow return on investment. The industry as a whole wants your money and higher prices are the path.
Look at what the auto industry did to prices and boom profit comes.
“It’s pathetic when you make the same major mistake over and over and over. It’s a result of groupthink.”
What makes you think it is a mistake? It looks to be very obviously planned, with carefully targetted ill intent. They know full well the (lack of) consequences for this accounting.
Here’s a free market solution, live in a store sign on the roof 🙂
https://torontosun.com/news/world/woman-living-inside-rooftop-store-sign-with-computer-and-coffee-maker-for-year
Thank god I don’t rent. I only have ever increasing property taxes(45% the past year), ever increasing homeowners(100% since 2020) and insane bids for any work I don’t want to do.
Soon I am going to not own anything and NOT be happy.
All of this is getting past the point of lunacy.
And now we have AI to worry about. “Learn to Code”. Yep…..see how well that worked out haha.
Something crappy is coming. Full on collapse, war, both, who knows. I just know that this mess of s*** isn’t going to hold together.
Any inflation measurement is not perfect. Because of hidden inflation people are getting struggling and drowning in debt.
Its easier for the FED to pay the interest of the national debt if the rate is low. So its not strange interest rate measurement might be artificially lowered.
But people’s purchasing power is getting less and less.
Over 50 years ago, one family member earned and lived comfortably for the whole family. Today two family members earned and still struggling to live. It means today’s salary purchasing power is more than 50% less than 50 years ago.
Hidden inflation is killing people.
The Fed does not pay the interest on the debt. The taxpayers do.
Local regulations to prevent affordable apartment construction (because they bring down school ratings and thus property values) in most cities combined with continuous population increases mostly in cities from immigration will tend to increase rents…
Exactly. As long as immigration is allowed non stop, you will need a place to live. I’m raising rents on my tenants because costs going up. Repair costs especially.
Today’s NYTimes has a new rent vs buy calculator. Renting is more economical than buying in 90% of locations.
They are liars. You build no equity. Some people cannot afford to buying or prefer rent, but you are usually better off buying. Unfortunately, the media has programmed people that a home is a stock and must appreciate 10-15% yearly vs. a place to live and build equity slowly. The purchase of homes by hedge funds has not helped with this premise. When, if, the next drop occurs, you will see people sell because their home dropped in value instead of just make your payments and in time things will level off. This is reflective of our mismanaged Federal and State governments. A lot of people are just as stupid as our supposed “leaders.”
Exactly! Dumbest thing I did was not buying real estate in the 90’s when I could easily afford it
There’s even housing inflation for people living in cardboard boxes. Good job Joe Biden!
https://packagingrevolution.net/wp-content/uploads/2021/12/fredgraph-1-e1640633932207.png
In the-last 12 months I have had 2 rent increases for my apt in LA resulting in 13% increase year over year.
For the month of April, oil averaged $84.51. If rents are still climbing in some areas then I don’t see how the CPI report out later this week will be good. We are also heading into peak driving/travel season so oil will likely go back up over the summer. Won’t be surprised if airlines bring back that fuel surcharge.
“It’s turtles all the way down and inflation all the way up.”
We are paying the same for a gallon of gas that we paid 11 years ago. Natgas for home heat is almost free. And diesel is the same price it was 13 years ago. Energy is not driving the inflation this time.
Oil is not just used for gasoline. What is the price of kerosene? What is the price for petrochemical feed stock? I mentioned the use of OIL not gasoline in my comment. High oil as an input permeates through everything made of plastic.
But we’ll see on Wednesday when the inflation report comes out.
Oil is used for lots of products tis true (mostly for fuels tho), but I can look up at any gas station and see exactly what Im paying for it day by day, It is the most transparent of energy end-user prices. Data is from chicagogasprices.com. Many of the other things you mentioned (plastics and oil derivatives) arent always as easy to price, but its possible they all price parallel.
When Trump was prez, I paid $1.97 for diesel and $2.19 for propane. My last fill of diesel cost $4.40 and my last propane was $3.40.
You also made a lot less money 30 years ago than you do now.
In printed up monopoly money, sure.
After taxes, health care, “insurance”, utilities, and other mandates, rent/mortgage, pension savings etc., most people did not. And certainly not if measured in something more meaningful than just said monopoly money; such as for example square footage of housing in desirable places to live.
Trump wasn’t prez 30 years ago, idiot.
When Trump was prez, lucky Donald rode the wave of (interest-rate-subsidized) frakking which had started in 2014 releasing a new wave of oil. After 10 years, frakking is done (only one field left — in TX — that is increasing production — remember Pennsylvania’s high hopes?) Ask Donald to “do that again” and see what he says.
If Voters vote their pocketbook the DEMS cannot win with out masasive Mail-ins . . . just like last time . . .
Mish, tell me if I am wrong but I recall that YEARS ago the CPI excluded FUEL and FOOD. Now, it excludes HOUSING costs?
Why don’t they just cherry-pick out EVERYTHING and admit that ALL of the numbers are CONCOCTED BULLSHIT.
You’re thinking of the PCE, the inflation gauge the FOMC uses as their inflation target. The PCE has the “benefit” of minimizing inflation spikes.
The food and fuel are included … just indirectly. Eventually those costs show up in all the items that actually DO count.
Dictator Joe Biden declared rent amnesty and left property owners on the hook for their mortgage payments. One way to get even with Joe is to raise the rent in an election year. Bye Joe.
Fact Check. Trump’s administration instituted an eviction moratorium in March 2020. After this Congress passed the CARES Act which gave legislative approval for the existing moratorium and included funds to implement it. Trump signed that bill into law. The CARES Act moratoriums for eviction and foreclosure were set to expire at the end of July. Trump, using his executive authority, then signed an EO on August 8th that extended the moratorium well into 2021. Biden simply continued Trump’s policy for a period of time and then lifted the moratorium. In conclusion, Trump instituted the eviction moratoriums and Biden ended them.
Joe was caught holding the bag.
Hmm, Joe gave me $16,000 for my rental losses when my tenant caught Covid. Guess you should maybe read the newspaper more to see how you can be included next time.
It took a year of waiting tho for the state of Illinois to get in gear.
You had me at “Illinois”.
Kunster today predicting President Hillary / VP Governor Fatso ticket coming out of Chicago convention.
More idle chatter. Gee, he didn’t go along with the other bozos predicting Michelle Obama for Prez?? Unless Biden has a medical disaster, he’s the candidate.