Home News Here’s why it may take a while for housing inflation to cool off

Here’s why it may take a while for housing inflation to cool off

by admin
0 comment

“Open House” flags outside a single-family home in Los Angeles, California, September 22, 2022.

Alison Dinner | Getty Images

There are signs that inflation could fall further in the coming months, but housing threatens to blunt the improvement.

the consumer price index, an important barometer of inflation, 7.7% increase in October from a year ago. While still fairly high by historical standards, that year’s reading was the lowest since January.

Monthly increases were also smaller than expected — giving hope to stubbornly high inflation and its negative impact on consumer wallets, may be relieving.

Still, shelter costs jumped 0.8% in October. This is his largest monthly increase in 32 years. Many observers believe that the United States “housing recession.”

But shelter inflation, at least as reflected in the CPI, could continue to rise over months to a year, given its importance to households and the intrinsic dynamics of the rental and housing markets. Economists say it’s expensive.

“As the housing market cools, so will this category,” said Jeffrey Roach, chief economist at LPL Financial.

Housing is the largest portion of household spending

The U.S. Bureau of Labor Statistics, which publishes the CPI report, defines four categories of “shelter”: rent, away-from-home accommodations (such as hotels), tenant and household insurance, and owner-equivalent housing rent. categorized into elements.

Rent and “owner’s equivalent rent” are by far the most important.

Fed is looking at the wrong housing index, says Wharton's Jeremy Siegel

The latter tries to put homeowners on par with renters. Moody’s Analytics deputy chief economist Christian Delitis said it basically reflects what homeowners pay to rent their homes.

Housing is the largest expense for the average consumer. Overall CPI weighting reflects: Shelter accounts for 33% of that, more than any other category. Shelter therefore has a very large impact on overall monthly inflation.

The Shelter category grew 6.9% last year.

Rental and housing markets are cooling

Busa Photos | Moments | Getty Images

Weak demand has lowered or eased home and rental prices in many parts of the U.S.

US new home listings for the month ending Nov. 6 were down 17.5% compared to the same period last year. according to to real estate broker Redfin. His regular selling price of $359,000 is down more than 8% from his June peak of $392,000, according to Redfin.

Mortgage demand drop down interest rates steady Recent peak of over 7%but the fee refused sharply last week.

Details from Personal Finance:
Why chicken prices are falling while egg prices are skyrocketing
3 steps if you lose your job
Top 10 most regretted college majors

Meanwhile, data from Zillow suggests that 2022 rental inflation will slow from last year’s ferocious pace.

Americans paid an average of $2,040 in market rent as of Oct. 31, according to . Zillow Observed Rent Indexseasonally adjusted.

Its rents rose 0.31% from the previous month on Sept. 30. However, the pace of its rise has slowed for the fourth consecutive month. In contrast, rents rose by about 1% from the end of May to the end of June. According to Zillow data, July 2021 and he August rent inflation reached 2% monthly.

Why Shelter Prices Are Delayed

You may also like