Good explanation. I recently read an article that noted that more people are renting single family homes now (presumably because of the still-rather-high price of buying). How might that affect this new measure?
It's a good point! So the unfortunate answer is that NTRR isn't going to capture the time when previously owned homes that are being converted to rentals (because they need a pair of new-tenant move-in prices from within the last six years).
However, new SFRs should be slowly incorporated into CPI as the housing panel updates, and if they remain rentals through multiple tenants they'll start showing up in NTRR.
A January 2023 New York Fed study of “inflation persistence” found “the housing sector clearly stands apart.” After wisely cautioning that a “backward-looking. . . twelve-month measure gives too much weight to data a year old,” the authors find a common inflation trend for both goods and non-housing services (contrary to Chair Powell) with both declining. “The common trend has declined since early 2022,” they demonstrate graphically, but the “sector-specific trend. . . almost entirely driven by housing has continued to increase.”
The data lag of OER -with its 24.5% weight- is a huge distortion which the Harmonized Index of Consumer Prices easily fixes (or CPI less shelter, or PPI).
Good explanation. I recently read an article that noted that more people are renting single family homes now (presumably because of the still-rather-high price of buying). How might that affect this new measure?
It's a good point! So the unfortunate answer is that NTRR isn't going to capture the time when previously owned homes that are being converted to rentals (because they need a pair of new-tenant move-in prices from within the last six years).
However, new SFRs should be slowly incorporated into CPI as the housing panel updates, and if they remain rentals through multiple tenants they'll start showing up in NTRR.
A January 2023 New York Fed study of “inflation persistence” found “the housing sector clearly stands apart.” After wisely cautioning that a “backward-looking. . . twelve-month measure gives too much weight to data a year old,” the authors find a common inflation trend for both goods and non-housing services (contrary to Chair Powell) with both declining. “The common trend has declined since early 2022,” they demonstrate graphically, but the “sector-specific trend. . . almost entirely driven by housing has continued to increase.”
The data lag of OER -with its 24.5% weight- is a huge distortion which the Harmonized Index of Consumer Prices easily fixes (or CPI less shelter, or PPI).
what do you use to create your charts? they look great
Hi p b! I use the programming language R. You can find all the code I use to make the charts here: https://github.com/Miles-byte/Apricitas
Awesome thanks Joseph!