- Miller Samuel Real Estate Appraisers & Consultants - http://ms.clash.outthinkgroup.com -

Renting the CPI Silver Lining

One of the things we have discussed on Matrix before [1] is the fact that housing sales are translated into “home renters equivalent” which is a significant portion of CPI (40%).

Our AXA advisors passed along the AllianceBernstein Investments Q1 2007 Capital Markets Outlook [2] and it provided an interesting outlook on rising housing vacancy and its downward influence on inflation and mortgage rates.

In short, AB is saying that rising vacancies will drive down rental rates and since housing rentals comprises 40% of core inflation, CPI is expected to drop to 1.5% later this year forcing the fed to lower rates, leading to lower mortgage rates.

In other words, the slow down in housing has not fully impacted the economy.