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An estimate of the rental value of housing services supplied by an owner-occupied home, used in consumer-price measurement.
Save conceptAn owner-occupied home is both an asset and a place to live. Consumer-price measurement needs a way to value the shelter service without treating the entire purchase as current consumption. Owners’ equivalent rent, or OER, estimates what the unfurnished home would rent for, excluding utilities. The owner does not actually owe this estimated rent.
BLS collects prices from sampled rental units and uses separate weights to represent owner-occupied housing. Adjustments account for structure, quality and utilities. Owner estimates of possible rent help establish spending weights, but BLS does not use those answers directly to measure monthly price changes. The distinction between a weight and an observed price is essential.
Suppose a comparable unfurnished home’s rental value rises from US$1,000 to US$1,030 a month. The illustrative change is US$30 divided by US$1,000, or 3%. This describes the price of its shelter service. The owner could have an unchanged mortgage payment throughout. Actual BLS indexes combine many observations and adjustments; this single hypothetical home is not a forecast or an official estimate.
A home’s sale price includes its value as an investment asset, whereas OER concerns the housing service consumed. Mortgage interest and are different measures again. OER cannot tell a reader whether buying a particular home is affordable or profitable. Rental sampling and continuing leases can also produce a different pattern from advertised rents for newly available homes.