by Calculated Risk on 12/16/2009 11:11:00 AM

From the BLS report on the Consumer Price Index this morning:

The index for all items less food and energy was unchanged in November after rising 0.2 percent in October. The heavily weighted index for shelter, unchanged in October, declined 0.2 percent in November. Within the shelter group, the indexes for rent and owners' equivalent rent both declined 0.1 percent and the lodging away from home index fell 1.5 percent.

Owners' equivalent rent (OER) decreased at a 1.5% annualized rate in November, and has decreased at a 1.1% annualized rate over the last three months. OER is the largest component of CPI, and helped keep core CPI unchanged in November. Median CPI from the Cleveland Fed was also unchanged.

Based on reports of falling rents - and a record high vacancy rate, OER will probably continue to fall for some time, keeping core CPI low and possibly negative next year.

Also - falling rents will push up the price-to-rent ratio, and put additional pressure on house prices.