People keep telling me the price of rent is falling. I keep doubting. The doubters have it correct again.

CPI data from BLS, chart by Mish

For the second straight month, this headline that caught my eye this morning: “U.S. stocks are rising after cooler-than-expected inflation data.”

Let’s tune into the BLS Report for the details. 

CPI Month-Over-Month

• Consumer Price Index for All Urban Consumers (CPI-U) rose 0.2 percent in June on a seasonally adjusted basis, after increasing 0.1 percent in May.
• The index for shelter was the largest contributor to the monthly all items increase, accounting for over 70 percent of the increase, with the index for motor vehicle insurance also contributing.
•  The food index increased 0.1 percent in June after increasing 0.2 percent the previous month. The index for food at home was unchanged over the month while the index for food away from home rose 0.4 percent in June.
• The energy index rose 0.6 percent in June as the major energy component indexes were mixed.
• The index for all items less food and energy rose 0.2 percent in June, the smallest 1-month increase in that index since August 2021. I

CPI Shelter

CPI shelter data from the BLS, chart by Mish

Shelter Notes

• Shelter comprises 34.67 percent of the CPI
• Rent of primary residence is standard rent (not owner occupied), unfurnished without utilities.
• Owners’ Equivalent Rent (OER), is the estimated price one would pay to rent one’s own house, unfurnished and without utilities. It is the single largest CPI component at 25.50 percent.
• The shelter index increased 7.8 percent over the last year, accounting for over two-thirds of the total increase in all items less food and energy.

CPI Year-Over-Year

Year-over-year CPI data from the BLS, chart by Mish

Year-Over-Year Details

• The all items index increased 3.0 percent for the 12 months ending June; this was the smallest 12-month increase since the period ending March 2021.
• The all items less food and energy index rose 4.8 percent over the last 12 months.
• The energy index decreased 16.7 percent for the 12 months ending June
• The food index increased 5.7 percent over the last year.
• Shelter is up 7.8 percent from a year ago.

Leading Indicators

And, little suprise, rents are starting to come down

57 of the 100 largest cities in America now have declining rents (source: @nickgerli1 ) https://t.co/oKbAUIZvaK

— Adam Taggart (@menlobear) July 10, 2023

Sorry folks, rent prices are NOT coming down, despite such reports for over a year now.

The price of new leases is coming down. But most renters do not move.

Would you move to save $50 a month? $100? It’s not worth the hassle unless the new place is cheaper, nicer, and more convenient.

Most analysts have been expecting the price of shelter to come down. 

I have not been in that camp and still aren’t although we are getting closer to smaller increases.

The idea that the price of new leases leads the way has certainly not lived up to its deceleration billing.

The Starter Home Is No More, Even in Second Tier Markets

In 100 of 100 markets, the average renter cannot afford a lower tier house.

Powell is waiting, and so are renters, because homes are miserably unaffordable with the average mortgage rate of 6.9 percent according to Mortgage News Daily.

For discussion, please see The Starter Home Is No More, Even in Second Tier Markets

Until the price of homes crash, or prices steady and mortgage rates crash, those looking to buy an affordable starter home will be out of luck.

This has widespread implications for household formation and the economy. Many people are trapped into renting, even when they want out.

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