CPI Data from the Twilight Zone
Bureau of Labor Statistics data doesn't reflect reality.
Rents Falling Everywhere
Given that the official measure of Consumer Price Index (CPI) is based on rents not housing prices, consider the following links courtesy of Lanser on Real Estate: Really? Rents fall almost everywhere.
Manhattan: Apartment rents drop as employers cut jobs
Nashville: Apartment rates squeezed by lower demand
Nationwide: Renters look for thrifty comfort, not style
Middle East: 17% fall in rents seen in Qatar this year
Falling Rents in Puget Sound
Over the weekend, several people sent me a link about rents in the Seattle area: Apartment rents falling in Puget Sound area.
A shrinking number of jobs and a growing supply of apartments will continue to push the Puget Sound region's rents down next year as vacancy rates climb, industry experts predict.
"Job losses killed our market, and development buried it," Mike Scott, of Dupre + Scott Apartment Advisors, told landlords at an industry conference Tuesday.
The average monthly rent across all apartment types in King, Pierce, and Snohomish counties fell from $988 to $959 during the 12 months ending in September, and a continuing decline through 2011 will further cut that figure to $889, Dupre + Scott projects.
While demand for apartments is falling, the supply is rising.
So far, 4,100 new units have opened this year, and more than 2,000 others are expected to become available by year-end, according to Dupre + Scott.
The firm estimates that about 20% of the 6,000 condos completed in the past three years are also on the rental market now.
The combination of job losses and new units has upped the region's vacancy rates from 6.6% last spring to 7.2% now, and heading toward 9% next year, the firm said.
To attract renters, landlords have lowered rents, and six out of 10 are offering concessions worth an average $757, according to the firm's research.
New York City Landlord Chimes In
On August 27, I received an email from a New York City landlord about falling rents and concessions. Below is a snip from his letter:
I'm a landlord here in NYC (as well as an avid reader of your blog) and I actually feel the 7% to 10% drop mentioned in the article understates the case somewhat. Based on what I'm experiencing, I'd say that rents are down 10% to perhaps as high as 20% from their peaks.
Twilight Zone Statistics
With home prices crashing year-over-year and both housing rents and apartment rents dropping, one might think that falling rents would be reflected in the CPI.
Inquiring minds are investigating 2009 BLS CPI Data to see if theory matches reality.
In what should be no surprise, the Bureau of Labor Statistics isn't in the ballpark. Here are some numbers and a chart:
CPI data for September 2009: The rent index was unchanged and the index for owners' equivalent rent (OER) increased 0.1%.
CPI data for August 2009: The rent index was unchanged and the index for owners' equivalent rent increased 0.1%.
CPI data for July 2009: The indexes for rent and owners' equivalent rent were unchanged.
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