Could be. Or at least that is one conclusion that could be fairly drawn from some informal analysis appearing in the most recent edition of the Federal Reserve Bank of Cleveland's Economic Trends. At issue is the ever-mysterious "owner's equivalent rent":
... one particular component of the CPI has received considerable scrutiny in recent months. The owner’s equivalent rent of primary residence (OER)—the opportunity cost a homeowner assumes by occupying their home rather than renting it out—is responsible for nearly one-quarter of the CPI market basket, and monthly growth in OER has been brisk since the beginning of this year. There has been speculation that the OER had been understating inflationary pressures because it is computed using prices from rental markets that may have been temporarily restrained by the boom in homeownership. Indeed, the 12-month growth rate in housing prices peaked around 14% in 2005:IIQ, and rental vacancy rates, at nearly 10%, are just short of their 50-year peak.
The pictures...
... and the conclusion:
A cooling housing market, accompanied by some reduction in rental vacancy rates, may be helping to propel the OER measure higher this year.
Indeed, it does appear, over the past six years or so, the OER measure has shown a tendency to lag rents paid for primary residences:
But it gets even more interesting:
Another factor may also be at work: Because residential leases often include utilities provided by the landlord, the Bureau of Labor Statistics subtracts these utility costs from rents when calculating OER. During periods of rising energy prices, the growth in OER may be understated until these higher energy costs are reflected in higher rents. So some of the recent upward pressure on the OER may be due to landlords incorporating the persistent rise of energy costs into their rental contracts.
Is there a relationship between utility costs and the gap between rents and OER? If we again restrict our attention to the recent past, it sure looks like it:
Note that the recent dip in fuel and utilities means a smaller adjustment in the owner's equivalent rent calculation, helping to push OER in the direction of the higher rent measure. That may or may not continue, but the tendency for the rent and OER series to cross makes you wonder if a near-term improvement in core CPI is in the cards.
If you would like to have the pictures above for your very own, well here you go: