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Owners' Equivalent Rent Correction

By Anonymous

In a post yesterday, I misread the BLS methodology on calculating Owners' Equivalent Rent.

For a discussion from the BLS of rent measures see: How the CPI measures price change of Owners? equivalent rent of primary residence (OER) and Rent of primary residence (Rent)

The survey question referenced in the above post is for weighting, not price changes.

The price relative for OER is calculated by sampling non rent-controlled renters every six months. These average rents are divided by the sample six months earlier - and converted to a monthly change (by taking to the 1/6th power).

From the BLS document above: "The first step is standardizing the collected (market) rents, putting them on a monthly basis, and adjusting them for a number of circumstances that should not affect the CPI."

To be clear - the BLS is using market rents, not the opinion of homeowners to calculated OER.

I apologize for any confusion.

Full post as published by Calculated Risk on June 18, 2009 (boomark / email).