Let’s review alternate measures of rent, especially new leases.
The BLS explains the New Tenant Rent Index (NTR) and the All Tenant Rent Index (ATR) Research Series.
The New Tenant Rent Index and All Tenant Regressed Rent Index are research index series that use data sourced from data collected in the Consumer Price Index (CPI) Housing Survey. The New Tenant Rent Index (R-CPI-NTR) measures prices renters would face if they changed housing units every period. The rent component of the official CPI measures the change in all rents, including new leases, renewals, and rents in the middle of a lease. In contrast, the New Tenant Rent Index uses only a subset of the data the official CPI uses, namely the first survey observations after new tenants move into their sampled housing units. The All Tenant Regressed Rent Index (R-CPI-ATR) is a measure with a scope similar to the CPI, but using methodology similar to the New Tenant Rent Index. The All Tenant Regressed Rent Index measures the rent paid by all renters, both new and continuing, and incorporates most of the survey data used for the CPI Rent of primary residence index. The All Tenant Regressed Rent Index is published alongside the New Tenant Rent Index to facilitate comparisons.
The New Tenant Rent Index and All Tenant Regressed Rent Index series are currently calculated as quarterly indexes, with observations from three months of the housing survey pooled together. The two series begin in 2005. Every period, the entire series is re-estimated. In the regression method used, new observation pairs influences the index over the entire time spanned by the pair. The most recent periods of a repeat transaction index like the New Tenant Rent Index are prone to large revisions, because the rent observations spanning those periods accumulate gradually as tenants move.
The New Tenant Rent Index and All Tenant Regressed Rent Index were adapted from the “New Tenant Repeat Rent Index” and “All Tenant Repeat Rent Index” of the research article “Disentangling Rent Index Differences: Data, Methods, and Scope“. The article further details the indexes’ construction and uses the index to compare the CPI rent component to other rent indexes. The New Tenant Rent Index and All Tenant Regressed Rent Index are currently calculated as prototype research indexes. Their methodology may change as they continue to develop.
CPI Rent, ATR, NTR Comparison
Chart Notes
OER is a BLS measure that stands for Owners’ Equivalent Rent, the price a homeowner would pay to rent his house, unfurnished, without utilities.
ATR and NTR are indexed to the first quarter of 2000.
BLS data is monthly so I used quarterly averages to produce my chart. I also set the index level to the first quarter of 2000 so that everything is in sync.
Percent Change from a Year Ago
- Rent of Primary Residence: 3.9 percent
- OER: 4.2 percent
- ATR: 2.8 percent
- NTR: -9.3 percent
It was on that last point the rent is crashing calls came out en masse. But I have seen this setup before.
NTR and ATR Confidence Levels
The range of confidence levels of NTR are -1.5 percent to -17.1 percent. The ATR confidence levels are 2.4 percent to 3.2 percent.
I have seen this kind of action before where NTR is revised heavily. The BLS even notes “The most recent periods of a repeat transaction index like the New Tenant Rent Index are prone to large revisions, because the rent observations spanning those periods accumulate gradually as tenants move.”
NTR Is New Tenants Only
NTR has another major flaw in that it is new tenant only. Zillow and Apartment List have the same flaw.
As of 2022 about 25 percent of renters move every year. I suspect that is high due to Covid, but it’s the most recent number we have.
About 65 percent of the population owns a home and 35 percent rent.
Annual moving is 0.35 * 0.25 = 8.75 percent plus some small percent of homeowners moving.
Attempting to extrapolate NTR across the whole market when only about 9 percent of the nation moves is a second serious mistake.
Four Quarterly Rent Indexes
Curiously, the ATR closely tracks OER and OER is the largest component of the CPI by far.
BLS Shelter Components June 2025
- Total Shelter: 35.418
- Rent of Primary Residence: 7.447 percent
- OER: 26.167 percent
The Objection to OER
The big objection that economists have with OER is that nobody pays OER. That’s true. Yet, it is the single largest component of the CPI, by far.
The reason nobody pays OER is that nobody pays themselves rent. People either have a mortgage or own their house free and clear.
When the Fed lowered interest rates to zero percent and kept them there for a year, mortgage rates dropped to 3 percent or below.
Most homeowners refinanced. This put extra money in their pockets every month, helping fuel inflation. We also had three rounds massive fiscal stimulus fueling inflation.
The price of homes soared.
Case Shiller Home Price Index
The Case-Shiller Home Price Index declined another 0.3 percent in May.
Percent Change Since January 2020 (Through May)
- Case-Shiller National: 52.1%
- Case-Shiller 10-City: 52.4%
- OER: 44.9%
- CPI Rent: 28.0%
- CPI: 24.3%
For discussion of the above chart, please see The Housing Top Is Likely In, Case-Shiller Home Prices Drop Again
The problem with the “Nobody Pays OER” theory is that home prices have risen 52.1 percent vs the CPI 24.3 percent and sources like Truflation ignore that massive price hike as if it’s not inflation.
The rationalization for this nonsense is home prices are a capital expense, not a consumer expense.
The silliness of the argument should be obvious: Inflation matters, not just alleged consumer inflation.
CPI Problems Don’t Stop There
The CPI also does not include homeowners insurance or property taxes.
So OER is seriously distorted.
Is Homeowners Insurance Understated in the CPI?
The short answer is grossly so. In fact, it’s nonexistent as most homeowners would understand matters.
The BLS only counts insurance of contents, not fire insurance, not flood insurance, etc., on the building itself.
The BLS weights “Tenants’ and household insurance” as a mere 0.417 percent of the CPI.
For more details and suggestion please see: Is Homeowners Insurance Understated in the CPI?
Do yourself a favor, read that post, and shop around for insurance. We saved $5,000 by switching.
Insurance is a massive part of our expenses, and the BLS ignores it totally. The BLS also ignored property taxes as if they don’t matter.
The BLS Shelter Index Is Totally Screwed Up
Returning to the ATR/NTR index chart, rent (in isolation) is overstated, judging from ATR, not NTR.
Here are the numbers again.
- Rent of Primary Residence: 3.9 percent
- OER: 4.2 percent
- ATR: 2.8 percent
- NTR: -9.3 percent
Throw away the last one as garbage. As a measure of “rent”, I accept ATR over the BLS measure “rent of primary residence”.
But the BLS measure of “shelter” which ignores taxes, the price of homes, and insurance, is garbage.
It’s a mistake economists make, Truflation proponents makes, the BLS makes, and the “nobody pays OER” proponents make.
Things are so damn screwed up with the BLS that I am reluctant to answer my lead question: “How Much Overstated Are BLS Measures of Rent and Shelter? Or Are They?”
And it’s not just shelter.
The BLS has royally messed up food as well. For discussion, please see Where Do You Spend Money on Food? How Screwed Up Are the BLS Weights?
I will have some specific recommendations in a following post.
The problem is, Trump does not want real numbers, he wants numbers that will decline.
Addendum – Chart from 2023 Q4
Year over year percent changes in five measures of rent, All data is end of quarter.
See that 4.74 percent decline. It never happened.
I posted that chart on February 14, 2024 in What’s Really Going on With Rent? Five Measures to Compare
Nearly everyone on the planet looks at that chart and tells me rent is dropping or that it will soon drop.
Rent is not dropping and I have been hearing “soon” for two full years because “the CPI is Lagging”.
Sorry, but year-over-year comparisons do not mean falling prices (see the yellow and green lines two charts back). And importantly, falling prices on new tenant leases do not mean falling prices on existing leases are imminent either.
We can now see that -4.74 was revised to +2.23.
OER plus rent CPI has been understated by about 20% for almost five years. Whatever measure anyone wants to believe, I promise you that rent price increases are ~20% higher than they are “calculating”, even for current conditions. If 2 million more deportations take place, claims of sub 0% rent growth may actually be believable. And lord knows, renters desperately need the relief.
PS when I say “20% higher”, I mean that if YoY shelter inflation was reported as 4%, then 4.8%_would have been closer to the actual number. Over five years of compounding, that error really adds up.
Simple question: if the same thing goes down but also goes up, how can they be reporting the same thing?
“We can now see that -4.74 was revised to +2.23.”
One thing we know for sure is that consumer inflation is understated if calculated on a realistic sample of goods that we buy on a consistent basis, primarily services.
Women like their house, bc it’s their safe haven and insurance. They like a $250K kitchen and a forth bedroom bc it’s a good investment. They like to travel and be served away from home in restaurants. They don’t like the hassle of cleaning the house. Women are the queens of the house. They rule it. It’s their territory. The men of the house are yes men. Their kids rule both !
a few red, red, red, please.
It’s a hormone thing. Woman look for safety.
That’s why I married a working girl. Serving royalty sucks!
But my lease has increased every year.
Capitalism.
Buyers are doing RE salesmen a favor looking at houses for sale. Next they will
do a favor looking at apt for rent. Turnover is rising fast.
a few red, red, red votes, please.
All good points Mish.
Here’s a thought about New Rents. There needs to be a look a absolute levels and not change. If new rents ran from 100 up to 180 and have now fallen to 150 and everyone is pointing at that, but old rents moved from 100 to 130… then new rents are still too high.
And yes, CPI does not measure what we experience and everyone experiences inflation different. If you owned a home would not higher prices offset higher insurance and HOA fees, etc. Unrealized gains are why people prefer to own.
I don’t think (or rather I hope) most people are not preferring to own their home for ‘unrealized gains’. Rather I suspect the reason most want to own is so they have a place to live and raise a family (this should be reason #1) and can decorate as they please (should be reason #2).
As far as rising home prices offsetting higher insurance + taxes + HOA fees the answer is a lot more complicated. As in it depends on how long you live there, how much the price appreciated vs all your costs (mortgage interest, taxes, insurance, HOA, maintenance etc). Sometimes you’ll do well, others you’ll break even and in some cases you’ll lose.
Yes, homes are primarily a roof over one’s head but in the USA, homes are considered an investment and are the main investment vehicle for a large majority of people.
Everyone wants and expects their homes value to appreciate.
The other day, my local newspaper ran a 45 point black headline at the top of page 1, which blared that local RE prices had declined! The median home price here has now plummeted from $2.0 million to $1.9 million.
OMG! WHO let this happen? Off with their heads!!!
Perhaps the new BLS flunky will force the organization to rethink how it calculates all the statistics it puts out?
I still think every released statistic should be smoothed via x month averaging.
Considering that almost everything is digital now it’s ridiculous that there isn’t a system in place to track the cost of all day to day expenses for everything. Same for labor since you need a SSN to get a job anywhere.
But the truth is there is strong incentive to keep the fake numbers low so they don’t have to increase things like SS COLA which is why I’ve been warning the 80m boomers that they are going to be royally screwed in 2030. I see it as sweet poetic justice for the mess they created. I can even hear the howls now in 2025 all the way from 2030.
The smart ones will listen, the dumb ones will be broke and miserable. Which one are you?
Got exit strategy?
oh and if you think “lifting the caps” will save you, ROFLMAO.
I’ll fully agree with you on tracking and analyzing data.
This pops up in all government areas everywhere regularly. A few weeks back some reporter locally was questioning some police statistic but of course, the police media person stated that they didn’t collect that particular data.
Why? Because some politicians had not requested that it be tracked.
Computer storage is almost unlimited and cheap. EVERY possible data point should be tracked, just in case it is needed. This will become much less of an issue when the AI’s take over.
No one is going to trust anything coming from this administration for the next 1256 days. The real question is how is all this fake manipulated data going to impact the treasury market because if the confidence goes then so may the buyers.
Newsom says he will end Trump’s presidency by redistricting California so it may not matter.
https://abcnews.go.com/Politics/newsom-californias-new-congressional-maps-trump/story?id=124609132
Not sure about the entire Treasury market but who will want to buy TIPS. There is a 30 TIPS reopening on the 24th – will be interesting to see the bid-to-cover ratio..
If part of the treasury market is broken, it’s all broken. Think about it and let it set in.
Treasury market will be fine.
Plenty of pension funds, index funds etc have requirements to hold X amount of the things so they just auto buy since after all it’s not their money.
Foreign countries running trade surpluses have no choice but to buy since that’s the only way the math can balance out (we get goods, they get piece of paper).
They can buy gold or other commodities instead. The silly Chinese are buying farmland and prime real estate in the US. Won’t those get confiscated if they take over Taiwan? But aren’t they currently shipping iPhones, computers and other Walmart ware currently for (digital) pieces of paper? Silly human race…
They definitely can and are doing those things.
But whomever they buy the land/gold etc from is now holding those treasuries since that’s what they use to buy the land/gold. In other words *someone* is always holding those treasuries so that’s why there isn’t a problem with demand.
Rent + OER east + OER midwest + OER south + OER west: 36%% bs !
If homeowners got lower interest rates and kept more cash, it means lenders got less cash in interest income. With no net effect on the money supply, I don’t think that would “fuel inflation.”
Low interest rates drives housing prices up, so bigger loans, and more money made by the lender.
People are dumb enough to keep playing that game, so on it goes.
Good lord. Look at home prices.
Of course, illiterates don’t count that, don’t count property, taxes, and don’t count insurance.
You are a perfect fit for the BLS where nothing counts but invalid measures of rent.
Several years ago, I did a straight (no cash out) refinance of my existing home – as did so many others as you noted.
I live in the same house as previously, but my my monthly mortgage payment went considerably lower. Are you saying my own personal inflation rate went down from a consumption perspective – since my ‘housing/shelter’ costs went down?
That would imply CPI was overstated all this time (since CPI showed some serious increases recently, but so many people refinanced at lower rates and payments). When you seem to imply here CPI is understated by using OER instead of Case Shiller (for example).
Anyone who refinances at a lower rate has a one-time reduction in there personal CPI. But insurance and property taxes (except for CA prop) goes up every year.
But home prices soared when the Fed slashed rates and Congress handed out free money. That is not accounted for anywhere.
All of those one-time mortgage reductions happened in a 12-15 month window (perhaps the early birds refinanced twice). Those are all history.
In addition, you have people like me who own their house free and clear.
It’s very complicated. All I am sure of is that the Fed hugely distorted the market, then failed to account for the ensuing inflation.
Since that refinance period ended, an OER that accounted for property taxes, insurance, and home prices would be seriously understated.
I have some ideas on how to address this in a subsequent post.
Not sure why the OER survey doesn’t ask what you pay in property tax + insurance. Tax records for example can just be scraped off the county websites for free if they wanted to do that and then they’d just need to ask about insurance. Those 2 things would help get the OER a lot more in line with reality because they are yearly payments that go up similar to what happens with rent (in rent case those 2 things are built into the rent price).
I look forward to your future post on these CPI calculations and their potential solution.
But I’d like to give two examples of why OER is used currently:
I refinanced my home eight years ago. The P&I portion of my mortgage payment (which is the majority of that monthly expense) has been the exact same since then. My home insurance has gone up every two years (sometimes a low amount and sometimes a medium amount) and my property taxes increased once during this eight-year period. This is the reality for many homeowners. Thus, half the years I have 0% inflation for my housing/shelter costs. The other years, I have a small percentage change of my entire housing costs even if my property taxes increased a significant amount for that one (out of 8) year period because my P&I payment still has not changed.
If you include me and many other such homeowners (as 0s) in an alternative CPI calculation (of actual P&I paid, plus annual insurance plus property taxes) based upon changes in entire housing costs, that part of CPI would be understated for the true cost increase of average homeowners. So imputing annual OER of what I could potentially rent my own home for (including to pay for increased insurance and property costs) is surely a better (but not perfect) calculation of 0% for me for this past year.
You are at the other extreme. You own your home outright and so have $0 in P&I payments. So yes, when your insurance and/or property taxes go up, it feels like you have massive percentage increases in ‘shelter’ costs. But not really when compared to me and even new home buyers. But it’s really a massive increase in certain home costs only (like hamburger meat). Does a 10% increase in your property taxes really mean you have a 10% increase in your shelter costs? Only in a very limited viewpoint.
But by staying ten years in your home with $0 P&I payments, you are foregoing the ‘extra’ stuff you could have if you sold your house, rented a new place and spent the interest household wealth on other things you like. So staying in your current home has these ‘costs’. Asking you annually what you could rent your house for (OER) gives a (imperfect) estimate for what it ‘costs’ you to stay in your ‘free’ home.
So 0% for me is too low in reality, and 10% for you is too high in these examples. And a 20% increase in a new home price for a particular city for a particular couple is real to them, but not what the shelter cost for the entirety of the nation is experiencing – which is what CPI is supposed to represent. OER is one way to blend our two extremes to mimic closer an average or median for the current homeowner population as a whole.