Housing costs in the United States have remained stubbornly high, according to data from the Bureau of Labor Statistics. The shelter component of the April Consumer Price Index (CPI) rose by 0.4% month-over-month, after a 0.6% increase in March. Additionally, year-over-year shelter inflation continued to outpace growth in other consumer prices, with shelter costs increasing by 8.1% in April, down slightly from 8.2% in March.
Shelter costs comprise a significant portion of the CPI, accounting for a third of the overall inflation index. Therefore, the increase in housing costs has contributed significantly to the overall rise in consumer prices. As a result, many households have been struggling to cope with the high cost of housing, especially renters.
Jeffrey Roach, the Chief Economist for LPL Financial, noted that shelter costs have been the largest contributor to inflation in recent months, causing acute pain for renters across the country. Despite the trend of high rental prices, National Association of Realtors Chief Economist Lawrence Yun expects rent growth to slow in the near future. According to Yun, apartment construction has reached a 40- to 50-year high, which means more units will soon come onto the market, increasing supply and potentially reducing rental prices.
However, in the single-family rental market, rents are still growing. Invitation Homes Inc. reported strong rental growth in Q1 2023, with new lease rents growing 5.7% and renewals up 7.8%. Preliminary results for April showed even more acceleration in rental growth, with new leases growing 7.5% and renewals up 7.2%.
Home prices are not directly used in CPI calculations but are strongly correlated with housing inflation. One measure found that home prices rose 0.45% in March from February, marking the strongest single-month increase since May 2022. However, the National Association of Realtors reported a 0.2% decline in the national median price year-over-year in Q1 2023.
Due to the intense housing inventory shortage, multiple offers are returning, especially on affordable homes. NAR's Yun said in a press release that price declines could be short-lived. Overall, the current state of the housing market is complex, with some segments experiencing strong growth, while others are expected to slow down. However, the trend of high housing costs and its impact on households is a significant concern.
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