Home prices surged in August despite an overall decline in inflation, according to the latest data released by the Bureau of Labor Statistics (BLS) on Wednesday.
Housing costs rose 5.2% year-over-year in August and 0.5% on a monthly basis, accounting for more than 70% of total inflation and accelerating from July's annual housing inflation rate of 5.1%, according to BLS data. showThe cost increase was the category's biggest increase in seven months and came despite inflation falling to 2.5% in August from 2.9% in July. According to To MarketWatch. (Related article: “The recession may already be on its way”: Biden administration admits it overstated jobs by nearly 1 million)
“Curveball [in August] “It's a re-acceleration of rents and owner-occupied equivalent rents,” said Michael Pearce, deputy chief U.S. economist at Oxford Economics. said Barons.
In August 2024, the CPI increased 0.2%, with home prices leading the increase. Energy fell 0.8% and food rose 0.1%. On a year-over-year basis, inflation increased 2.5%, the smallest increase since 2021. Core inflation (excluding food and energy) increased 3.2% over the past year. pic.twitter.com/ccc8LRXHIO
— Econoday Co., Ltd. (@Econoday) September 11, 2024
Housing costs generally adjust slower than other categories because rents are often fixed for the life of a lease. As a result, housing inflation is expected to remain above pre-pandemic levels until the end of 2025, despite a recent slowdown in price growth for new rentals. According to To the Federal Reserve Bank of Minneapolis.
But the acceleration in home price inflation in August was surprising, given that prices for new rental properties peaked more than a year ago, said Brian Rose, senior economist at UBS.
“Something like OER [owners’ equivalent rent of residences] “Right now, OER is accelerating,” Rose told Yahoo Finance. “In actual rental data, we have high-frequency data that shows us when people are signing new leases and what their rents are. You know, this peaked almost two years ago. And to see OER accelerating at this point is very odd and very hard to explain.”
Housing costs contributed to a 0.3% monthly increase in core inflation, 0.1% higher than economists had expected. Core inflation excludes volatile items such as food and energy and is one of the main considerations when the Federal Reserve considers cutting interest rates, which could influence the Fed's decision to cut rates when the Federal Open Market Committee (FOMC) meets on September 18. According to To Investor's Business Daily.
rental and Owner's Comparable rents for both have increased by about 22.5% since President Joe Biden took office in January 2021, according to the Federal Reserve Bank of St. Louis. inflationMeanwhile, it is slightly lower at 20%.
The rise in housing costs is driven by a housing shortage, with the Pew Charitable Trusts estimating in November 2023 that the U.S. faces a housing shortage of between 4 million and 7 million homes.
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