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There are very serious flaws in using Apartment List or Zillow to estimate BLS price moves. But let’s discuss the current data and how it is best used.

Data from Apartment List, chart by Mish.

Please consider the Apartment List National Rent Report for August.

Our model captured an average rent decrease of -0.1% in August, and today the nationwide median rent stands at $1,412. This signals the end of the rental market’s annual busy season, as well as the second consecutive summer of modest rent growth, as the market remains sluggish thanks to a windfall of new supply. If historical trends hold, rents will continue to fall on a monthly basis for the remainder of the year.

Since the second half of 2022, the seasonal declines in rent prices that take place during the fall and winter have been steeper than usual and seasonal increases of the spring and summer have been more mild. As a result, apartments are on average slightly cheaper today than they were one year ago. Year-over-year rent growth currently stands at -0.7 percent and has now been in negative territory for over a full year. Despite this, the national median rent is still more than $200 per month higher than it was just a few years ago.

Zooming in a bit, 59 of the nation’s 100 largest cities saw rents fall in August, in line with the broader national trend. And on a year-over-year basis, rent growth is negative for 52 of these cities. Many of the steepest year-over-year declines remain concentrated in Sun Belt cities that are rapidly expanding their multifamily inventory, such as Austin (-7.5 percent year-over-year), Raleigh (-5.6 percent), and Atlanta (-4.9 percent).

Two Huge Problems vs BLS

• Apartment List Data is for new leases only.
• Apartment List Data is not seasonally adjusted.

If you are looking for a new lease in a new city, then great. Apartment list data is likely to help.

But new leases are only about 9 percent of the rental market. So using new leases as a proxy for where national rent measures are headed and how fast is nonsense.

Apartment List, OER, CPI Rent, Zori Year-Over Year

Zillow seasonally adjusts its data but it suffers from the same key issue in using new leases as a measure of national rent prices.

Amusingly, the results of Zillow and Apartment List are wildly different, yet both show upward slopes in year-over-year prices.

The BLS shows downward slopes, undoubtedly correct. BLS data is very lagging, but that is no excuse to throw in flawed measures hoping to improve the BLS lag.

For those looking for a new apartment, Apartment List appears to make sense. For example, I have no doubt that new leases in Austin, and perhaps all leases in Austin, are heading lower due to massive supply.

CPI In June

In June, the BLS reported the price of rent and owners’ equivalent rent rose 0.3 percent each. That broke a string of 33 consecutive months of each rising at least 0.4 percent month-over-month.

The largest component in the CPI is Owners’ Equivalent Rent (OER) with a weight of 26.76 percent. OER is the price homeowners would pay to rent their own home if the rented instead of owned.

Rent of Primary Residence is another 7.64 percent, and the broader Shelter category is a huge 36.32 percent of the CPI.

On August 14, I commented Consumer Price Index a Tad Better than Expected Year-Over-Year

The consensus estimate for year-over-year CPI [in July] was unchanged. I accurately called for a 0.1 percent drop but was high by 0.1 percent month-over-month.

I estimated 0.1 percent month-over-month because I expected better shelter readings than we got.

Shelter Was Hot in July

I was a bit surprised to see rent jump 0.5 percent and OER 0.4 percent in July.

Looking ahead, the next release of the Consumer Price Index (CPI) from the Bureau of Labor Statistics (BLS) is scheduled for Wednesday, September 11, 2024 at 8:30 AM Eastern Time

Given the weight of rent in the CPI, I expect big improvements on the year-over-year CPI as well.

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