The government’s estimate of the cost of owning a primary residence rose 0.8 percent in September and was up 6.7 percent compared to a year ago, which is the largest 12-month increase in the category’s history.
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The consumer price index rose another 0.4 percent from August to September and was 8.2 percent higher year over year, according to the U.S. Bureau of Labor Statistics. This came despite a significant drop in gas prices nationwide.
The biggest single factor driving prices up was housing. The government’s estimate of the cost of owning a primary residence rose 0.8 percent in September and was up 6.7 percent compared to a year ago. That’s the largest 12-month increase in this category’s history.
The price of rent for a primary residence climbed by the same amount monthly and was 7.2 percent higher than in September last year.
“The housing shortage was present years ago, yet America underbuilt homes in relation to population growth,” National Association of Realtors Chief Economist Lawrence Yun said in a statement. “The consequences are evident in rent growth and high home prices. Even with an anticipated fall in home prices in some markets — principally in California –homes will continue to be unaffordable, while rents are squeezing non-owners.”
Estimates of housing costs have risen even as demand for homes has declined and home prices have begun to fall in many parts of the country.
Still, many Americans now live in homes that were purchased over the past year, when house prices and mortgage rates rose rapidly in tandem. And renters have had to navigate aggressive hikes in local prices over that same time.
Unlike more volatile categories, such as food and energy prices, housing is considered a “core inflation” category by most economists. This makes it one of the toughest inflation sources to tame and takes time until new policies are widely felt by the typical American.
But there are signs that the fast-paced rent growth of the past year is already calming down, according to a recent report from Realtor.com. And homes appear to be selling for lower prices than they would have a few months back.
Yun said that the Fed’s efforts to fight inflation by stunting demand for homes and other goods and services will only go so far.
“The Federal Reserve is trying to cut demand to reduce inflationary pressure, but inflation can also come down by increasing supply,” Yun said in the statement. “America has to produce more of everything, from building more homes and industrial spaces, to drilling for more energy and manufacturing more electric cars.”