One can only hope. The housing component of the CPI has been criticized on many grounds. But some recent research by the BLS and the Cleveland Fed have produced two new housing price indexes: the New Tenant Repeat Rent Index (NTRRI) and the All Tenant Repeat Rent Index (ATRRI), I have little doubt that the BLS is currently evaluating these as replacements for all or part of the CPI housing component.
The housing component of the CPI currently tracks contract rents for all units. This measure lags the actual current market rent. Think of the contract rents as the average rent over all units. The NTRRI is (at least) closer to the marginal rent, the rent paid on recently rented units. (This is a simplification. For a more accurate description, read the pdf summary by Joey Politano below.) Here’s the abstract from the working paper download page:
Prominent rent growth indices often give strikingly different measurements of rent inflation. We create new indices from Bureau of Labor Statistics (BLS) rent microdata using a repeat-rent index methodology and show that this discrepancy is almost entirely explained by differences in rent growth for new tenants relative to the average rent growth for all tenants. Rent inflation for new tenants leads the official BLS rent inflation by four quarters. As rent is the largest component of the consumer price index, this has implications for our understanding of aggregate inflation dynamics and guiding monetary policy.
Kudos to the researchers who created these indexes:
I’m proud to include Dr. Adams as one of my former colleagues on the faculty of California State University, East Bay. Here’s Mr. Politano’s summary.