The latest inflation data showed rents remained stubbornly high in November, but real-time data suggests national rental prices could ease heading into 2023.
The shelter component of the November Consumer Price Index (CPI) — which makes up about a third of the overall inflation index — rose 0.6% month-over-month and 7.1% year-over-year. The shelter component includes rent prices and what it would cost the owner to rent an equivalent apartment, known as owners’ equivalent rent.
But at the same time, real-time data shows rents across the country have softened for the third consecutive month. And given CPI’s lagged nature, inflation data will likely take time to reflect this reality.
“The biggest single component of the core of CPI — rent — is still rising rapidly, but the rate of increase has peaked in recent months,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in note following Tuesday’s data, adding: “It is becoming ever more clear from private sector rent data that the next big move in the CPI measure will be a substantial slowing.”
Housing costs were “by far the largest contributor” to the overall CPI gain, the Bureau of Labor Statistics said Tuesday. Overall, consumer prices increased at an annual 7.1% pace, while core CPI, which excludes volatile food and energy sectors, rose 6% compared to a year ago.
But data from Zillow’s Observed Rent Index showed asking rents for new leases nationwide dropped 0.4% from October to November, the largest one-month dip in the seven-year history of the survey. The national average asking rent price now stands at $2,008, according to the survey, 8.4% higher than this time last year.
RealPage data also indicates a dramatic deceleration in rent growth, which reached 6.5% on a year-over-year basis for new leases. That’s the lowest reading since June 2021 and down from the peak of 15.7%