Inflation may not be as high as the government says it is thanks to latency built into the Bureau of Labor Statistics calculation of the Consumer Price Index. Marcus & Millichap SVP of research services John Chang explained the phenomenon in a recent research video.

The CPI analyzes the prices of various goods, including apparel, recreation, education, medical care, food and transportation. The biggest component of CPI is housing costs, which account for 45% of consumer spending. Chang described this calculation as 'a bit out of proportion' as the average U.S. household spends between 25% and 30% of their income on housing.

A deeper look into housing costs reveals that 8% of total CPI inflation is driven by rent growth and an additional 27% is driven by owners' equivalent rent, a somewhat controversial concept among economists. Owners' equivalent rent is a hypothetical model number meant to represent what a homeowner would have to pay to rent the home they live in, explained Chang. It is based on a renter survey conducted by the Census Bureau of about 5,000 renters each quarter.

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