EVERYWEHERE AND ONLY A FUNCTION OF WAGES:

Brian Adams, Lara Loewenstein, Hugh Montag, and Randal J. Verbrugge published published "Disentangling Rent Index Differences: Data, Methods, and Scope" where they created the New Tenant Repeat Rent (NTRR) Index and All Tenant Repeat Rent (ATRR) Index. Using the same underlying BLS microdata that composes the housing component of the CPI, the NTRR uses information on lease turnover to track rent growth in units that change tenants. The ATRR covers all housing units but attributes rent changes to when they happened, as opposed to the official CPI data which tracks price changes when units are surveyed.

The paper helps identify the relationship between NTRR, ATRR, and the official CPI--in particular, it says the ATTR leads the official CPI data by about one quarter and the NTRR leads the official CPI by about a year. This is a critical signal for monetary policy, as the NTRR caught the weakness in housing price inflation in 2006/2007 long before official CPI data. Given the NTRR readings in 2022, we can currently expect year-on-year rent inflation to peak in Q1/Q2 of this year and begin decreasing in Q2/Q3.

Also, this data helps confirm some of the signals that private-sector rental data have been showing since June of this year. Similar repeat-rental datasets from ApartmentList and Zillow have been showing rapid decelerations in year-on-year rent growth since this summer, and the NTRR data affirms this while suggesting a later and lower peak for housing inflation. [...]

NTRR data also helps affirm the relationship between monetary policy, labor market dynamics, and the cyclical components of inflation. Growth in Gross Labor Income (GLI), the sum of all wages and salaries in the economy, is highly correlated to cyclical growth in the rental components of CPI, but previously we could only see this relationship with a time lag and a gap in growth rates. With the NTRR, we can see the relationship much more clearly--cyclical economic strength influences GLI growth, which then drives movements in rents for new tenants, which then gets passed on to CPI housing indices with a one-year lag.

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