Eric Audras | Photoalto | Getty Images Couple looking at properties in window of real estate agency.

What does the consumer price index (CPI) have to tell us about the future of the housing market?

Apparently a lot.

Let me first explain a few things for those of you housing types who don't follow this monthly number. The CPI is the most common way to measure inflation. There's the big number and then what's called the "core" number, which is the big number minus food and energy costs (gas prices obviously skewing things a lot these days). The big number was pushed down thanks to a drop in gasoline prices, but the core number was higher than expected, thanks to housing.

One component of the CPI is the "Owners Equivalent Rent," (OER) measures the amount of money it costs to live somewhere, anywhere, be it a rental apartment or your own home.

"The key factor in the higher than expected core rate was a .2 percent rise in Owners Equivalent Rent, the biggest gain since March '09," writes Peter Boockvar of Miller Tabak. "This figure is important because it makes up 25 percent of CPI and 40 percent of the core. Apartment landlords are gaining pricing power as vacancies fall as the homeownership continues its decline. This is a secular trend and will result in a further lift in core inflation going forward."

Theoretically, this rise in the OER should make homeownership more attractive, since rents are what's pushing the number up, not the costs involved in owning a home (mortgage payment, insurance, maintenance). The trouble is that despite much-improved affordability, rising rents, historically low mortgage rates and a glut of properties for sale, potential buyers are strapped by the increasingly tight mortgage market; rates are low, but qualifying for those low rates with sizeable down payments and full documentation is hard for a lot of borrowers, especially those who have taken a credit hit lately. Boockvar says he expects the rental market to overshoot, just as the housing market did during the recent boom, because already, despite all the reasons people should buy, they are still racing to rent in droves, much of it based entirely on fear.

Next week we get a slew of June data that could give us an idea just how much the market is swinging away from homeownership and toward renting. On Tuesday we get housing starts. The expectation is for a big bump in multi-family starts, as there is a huge lack of supply for the ever increasing demand. Given the drop in home builder sentiment last month, single-family housing starts could suffer, although that number is particularly volatile and sensitive to big revisions. We get the new sentiment number Monday.

On Wednesday we get June existing home sales from the National Association of Realtors. This closings number will reflect contracts signed in March and April, so a real gauge of the Spring market. Sales fell in May, with the Realtors laying the blame on bad weather, rising gas prices and tight financing. We'll be watching for the share of distressed sales, as fewer bank-owned properties have been selling lately, which is a third of the market. If the share of distressed sales falls, that would push the overall median price number higher, since distressed sales are at the bottom of the price ladder. Stay tuned...