Worst US inflation since ’82 is huge underestimate

Shelter accounts for about a third of American household expenditure, and the cost of buying or renting shelter is up nearly 20% over the past year. Yet the Consumer Price Index for shelter reported Jan. 12 by the US Bureau of Labor Statistics showed an increase of just 4.2 over the past year. Private surveys conducted by the big rental sites, Zillow and Apartmentlist.com, show increases of 13% to 18% during 2021, and the Case-Shiller Index of US home prices jumped 18% in the year through October.

Who are you going to believe, to paraphrase Groucho Marx – the US government or your own eyes?

Part of the discrepancy involves a simple time lag. The US government looks at the present cost of housing  while the private rental surveys register the cost of a new rental. It takes a while for leases to expire and new, higher-cost leases to take effect. Changes in the Apartmentlist.com rent index predict changes in the CPI shelter index with lags up to eight months. That explains at least part of the divergence of the CPI rent inflation number from the private rental surveys.

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