Rent Inflation Is Moderating

The CPI's rent of primary residence is showing no signs of peaking, rising to 8.6% y/y during January (chart). However, it is widely recognized that this measure is a laggard because it includes rents not only on new leases, but also outstanding ones. The market-based rent inflation indexes compiled by Zillow and ApartmentList have been plunging from around 17% a year ago to 6.9% and 3.3% during January.

These two indexes seem to lead CPI rent inflation by about a year. Furthermore, while the two rent measures in the CPI are rising on a y/y basis, the three-month annualized percent changes have been relatively flat for the past five months (chart). We conclude the CPI rent inflation should peak by mid-year.