Last weeks CPI-Consumer Price Index includes Shelter costs – Rent rose 0.4% in July and 7.7% year over year. Shelter cost account for 2/3 of the CPI number.

But here’s the question: how does the industry measure or attain that data?

One of the measurements is called Owner’s Equivalent Rent or OER, which tries to capture an increase in homeownership costs and help direct individuals to either buy or rent based on monthly cost. This is done by survey only with no real hard data. This is called Imputation.

-the assignment of a value to something by inference from the value of the products or processes to which it contributes.

The question to the homeowners is “what would you rent your property for?”.

The point is there is hard data and then there is soft data. The Fed is making decisions based on both. Shelter costs are a big component of the CPI Consumer Price Index.

Have a great week and always feel free to reach out.