Is slip in homeowner costs a trend?
NEW YORK – July 18, 2007 – Research by the Bureau of Labor Statistics (BLS) finds that a drop in homeownership costs has played a major role in the declining inflation rate, and the likelihood that the slowdown will continue as long as the housing downturn plays out should make the Federal Reserve confident about maintaining a moderate inflation rate.
About a quarter of the consumer-price index is attributed to owners' equivalent rent (OER), which uses a sample of thousands of rentals nationwide to gauge how much rent homeowners could collect on their properties.
In recent months, OER and actual rents – which typically are aligned – have diverged, which BLS researchers attribute to differences in their calculations. They note that renter-dominated communities and cities are heavily weighted in the rent calculations, while OER calculations focus more on owner-dominated neighborhoods and cities.
The BLS reports a 4.4-percent jump in rents and a 3.5-percent increase in OER during the year-over-year period ended in May. Rents and OER edged up just 3.5 percent and 2.1 percent, respectively, during the last three months.
Source: Wall Street Journal (07/18/07) P. A4; Ip, Greg
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