The government relies heavily on 'owners' equivalent rent' when calculating the pace of shelter costs in the US. This measure could also be distorting how...
It’s called owners' equivalent rent, or OER , and it attempts to measure what homeowners could hypothetically charge to rent their own properties.
That could be distorting how everyday Americans view inflation, which is still showing signs of stickiness in the official government readings. The slow inflation fight is a major reason why many Americans feel so dour about the economy."When people see really high inflation, this is a component they do not see," Dean Baker, senior economist at the Center for Economic and Policy Research, told me.
In this way, the state of the rental market informs this calculation. If rents are high, a homeowner likely would assume they would get more for rent and vice versa.While rents have eased some this year, they are still just 1.4% off from their all-time peak in August 2022,In fact, nearly 40% of homeowners — or about 33.3 million people — don’t even have a mortgage payment every month because they paid off their home loan.that does not change from one year to the next.
If the people conducting the Consumer Expenditure Survey asked me to estimate what rent I could get for our apartment, I would probably say $3,500 a month, even though my old mortgage payment was far lower than that.
OER Mortgage Payment Shelter Costs Consumer Price Index Consumer Expenditure Survey Homeowners Slow Inflation
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