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Disparities between rents and OER in the US.

One of the most important components of the CPI report, and particularly for the core CPI measure is the owners equivalent rent, or #oer. It’s a smoothed, averaged indicator that tries to eliminate noise in the shelter component. Due to its construction, it’s a lagged indicator, and does not offer an insight on the real behavior of the real estate sector. As can be seen below, rents in the US have fallen, on average, but #oer has kept climbing. As the new data for rents enter the averages of #oer calculation, we should see a retracement, and a subsequent fall on the core cpi index. The weight of oer in the core index is about 30%.

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