Real Rents Remain Ahead of Inflation
In May, rents outpaced inflation for the second month in a row. While the overall Consumer Price Index (CPI) remained unchanged at 183.3, the residential rent CPI subindex grew at a (seasonally adjusted annual) rate of 3.6%.  That was only half as dramatic as the scenario in April, when rents also increased by 3.6% while the overall CPI  declined substantially. Neverthless, the real rent index (residential rent adjusted for inflation) now stands at 107.9--the highest it's ever been.

Given persistent high vacancy rates, some may wonder why rents haven't shown more signs of weakness. One factor to keep in mind is that, because owner-occupied and rental housing are substitutes, there is an economic balance between house prices and rents, and house prices have continued to appreciate (at an average annual rate of 6.5%, according to the OFHEO House Price Index for the first quarter of 2003).

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