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  • Writer's pictureKCStark

Inflation and Housing Costs Display Encouraging Trends

As we step into spring, there's a refreshing sense of optimism in the air!


Recent data reveals that both the overall inflation rate and housing costs are beginning to cool down in March. This positive shift signals a brighter future for the economy and housing market, providing much-needed relief for homebuyers and renters alike.


March 2023 saw a slowdown in the overall inflation rate and housing costs, with the shelter index experiencing its smallest monthly gain since November 2022.


  • Housing remained the largest contributor to inflation, accounting for over 60% of the increase when excluding food and energy.


Federal Reserve's Limited Influence on Housing Costs


  • Rising housing costs are primarily driven by a lack of affordable supply and increasing development costs, limiting the Federal Reserve's ability to address them.

  • More housing supply is the key to curbing housing inflation.


Fed Tightening and Housing Supply


  • Further tightening of monetary policy by the Fed may increase acquisition, development, and construction (AD&C) financing costs, potentially hurting housing supply.

  • Despite policy tightening, shelter costs are expected to decline later in 2023, according to the NAHB forecast.


Consumer Price Index (CPI) Trends


  • The Bureau of Labor Statistics reported a 0.1% increase in the CPI in March, following a 0.4% rise in February.

  • The index for shelter rose by 0.6% in March, after a 0.8% increase in February.


Owners' Equivalent Rent (OER) and Rent of Primary Residence


  • Both OER and rent of primary residence increased by 0.5% in March.

  • OER has averaged a 0.6% increase over the last three months, significantly contributing to headline inflation.


Annual Inflation Rates


  • In March, the CPI rose by 5% over the past 12 months, the slowest annual gain since May 2021, following a 6% increase in February.

  • Core CPI increased by 5.6% over the past year, while the food index rose by 8.5%, and the energy index fell by 6.4%.


Inflation and Housing Costs Display Encouraging Trends

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