The Residential Real Estate Crash Index Message Board

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Strategies & Market Trends : The Residential Real Estate Crash Index

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To: Fiscally Conservative who wrote (36311)	7/26/2005 9:33:10 PM
From: gpowell	Read Replies (1) of 306849

Yes. The CPI includes both tenant rents (rent of primary residence) and owner's equivalent rent (OER). The two combine to represent about 30% of the weighting in the CPI index. The weights of rent and OER are based on the Consumer Expenditure Survey (CES). I see that it is once again being erroneously reported on this thread that the OER is derived from the CES – only the weighting of the OER is determined from this survey. OER itself is determined through a study of tenant rentals of comparable physical attributes (Sq Ft, bathrooms, bedrooms etc) in the neighborhoods being analyzed. There a great deal of evidence that the methodology used by the BLS does not entirely capturing the behavior at the upper end of the market, consequently OER rent inflation tended to be over estimated through much of the 90’s while in early in this decade it tended to be under reported (slightly).

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