Housing preferences during the pandemic: effect on home price, rent, and inflation measurement.

Abstract

With shelter comprising a one-third weight in the Consumer Price Index, an accurate measure of rent change is essential for determining factors affecting inflation measurement, economic policy, and consumer and business decisions. The pandemic led to a shift in consumer demand for more residential space, both in the home’s interior and exterior. With remote work severing the need to be located near the place of employment, some households opted for more space in lower-density areas, moving out of high-rise structures in the urban core to suburban and exurban single-family and low-rise homes, altering the price and rent-growth patterns among single-family detached, attached, and multifamily properties. While measures of rent change are available for multifamily residential properties, none exist for the single-family rental market, which makes up one-half of the residential rental market. The CoreLogic Single-Family Rent Index (SFRI) fills the gap in rent measurement. The SFRI is a repeat-transaction rent index for single-family homes and is available monthly for the U.S., by major metros, by rent price tier and by property type. The SFRI reveals that after 12 months of the pandemic annual rent growth for detached properties was more than 5 percentage points higher than for attached properties. Substituting the SFRI for Owners’ Equivalent Rent, we find that Core CPI inflation would be nearly 2 percentage points higher by mid-2021. To the extent the rapid acceleration in single-family detached rent growth has yet to be reflected in the CPI, inflation measurement will be understated with delayed signals for economic policy makers.