May 04, 2005 (The Editor’s Desk is updated each business day.)

Shelter inflation in 2004

Shelter costs rose 2.7 percent in 2004, following a 2.2-percent advance in the previous year.

[Chart data—TXT]

About 90 percent of the shelter component is made up of owners’ equivalent rent of primary residence plus rent of primary residence. These two indexes accelerated very slightly in 2004. The remaining three components of shelter—hotels and motels, lodging while at school, and tenants and household insurance—each advanced much more in 2004 than did the two rent indexes.

The owners’ equivalent rent index rose 2.3 percent in 2004, up modestly from a 2.0-percent advance in 2003. The rent of primary residence index increased 2.9 percent last year, up a little bit from a 2.7-percent rise in 2003. Over the past 3 years, both an increasing supply of rental units and an increasing incidence of households moving out of rental units and into purchased homes may have served to hold rental increases at relatively low levels.

The index for hotels and motels rose 5.0 percent in 2004, the highest increase in 7 years, following a 3.1-percent rise in 2003. On balance, for all of 2004, demand for popular vacation destinations and convention centers marked a return to pre-September 11, 2001, levels. 

The index for housing while at school, excluding board, rose 6.9 percent in 2004—the highest increase in 12 years—following a 5.7-percent rise during the prior year. As in prior years, State budget cuts for education continued to lead to higher costs of school housing.

Tenants’ and household insurance charges rose 3.8 percent last year, after increasing 1.8 percent in 2003. Insurance premiums were often increased to recoup both investment losses and policyholder claims for natural disasters, including damages sustained from the hurricanes in August and September, from the past several years.

These data are from the BLS Consumer Price Index program. Annual percent changes are December-to-December changes. Details on the calculation of rent of primary residence and of owners’ equivalent rent of primary residence are in Consumer Price Indexes for Rent and Rental Equivalence. For additional information on consumer price changes in 2004, see "Consumer price index, 2004," by Todd Wilson, Monthly Labor Review, April 2005.  

 

Related TED article: 

• First rise in consumer durables prices since 1996