Get ahead of the FED – Why Inflation Isn’t as High as People Think

WHY TRUE INFLATION MAY BE LOWER THAN THE BLS IS REPORTING​

BLS Housing Data Out Of Alignment With Market Data​

• The BLS uses “Owners Equivalent Rent” to estimate what homeowners would pay in rent in their dwellings ​

• This survey rent data lags the market data observed by Zillow and RealPage by roughly a year​

• This lag means CPI is being calculated with housing rent growth numbers over 5% in May 2024 ​

Market Data Would Show Inflation Closer To 2%​

• If the Zillow data for SFR costs are substituted in the CPI calculation, the inflation rate falls from 3.3% to 3.0%​

• Going one step further, if RealPage traditional rent growth data is used in place of the BLS survey rent numbers as well, CPI would fall further to just 2.6%​

Inflation Poised To Fall Quickly As Data Catches Up​

• As the rent growth time lag plays out in 2024, it is likely inflation readings will approach the Fed target level of 2% quickly​

• If 2% inflation is achieved it is likely the Federal Reserve will begin the process of reducing interest rates this year​

*Through May​
Sources: Marcus & Millichap Research Services, BLS, Zillow, RealPage, Inc.​

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