The cost of housing surged in July, accounting for nearly 90% of total inflation, according to the latest Bureau of Labor Statistics Consumer Price Index (CPI) data released Wednesday.
Shelter costs rose 5.1% year-over-year and 0.4% month-over-month, after rising 0.2% in June, the BLS showed. The 0.4% monthly increase was greater than Bank of America economists’ expectations of 0.3%, according to investment research firm Morningstar. (RELATED: Biden Admin Housing Measures Could Add More Gasoline To Home Shortage Fire, Experts Say)
“The most disappointing aspect of this report was the shelter data,” Omair Sharif, founder of the research firm Inflation Insights, wrote in a note after the report, according to Yahoo Finance.
‘Disappointment’ came from shelter which contributed 90% of the July increase. OER up 0.36% after 0.27% in June. Still low compared to ’22-23 but moving in the wrong direction. I suspect rising insurance and taxes are the culprits here, albeit indirect. https://t.co/rgjOEW6FB6
— Benjamin M. Lavine (@benjaminMlavine) August 14, 2024
The July increase in shelter costs was comprised of a 0.5% increase in rent, a 0.4% increase in owners’ equivalent rent and a 0.2% increase in lodging away from home, BLS data showed.
Rents are typically fixed for the duration of a lease, creating a lag between new lease prices and rental inflation data. As a result, despite cooling prices for new leases, overall housing inflation is expected to remain above pre-pandemic levels through the end of 2025, according to the Federal Reserve Bank of Minneapolis.
“Rents are up 22.3% since Jan ’21, but this metric suffers from large lags and will continue marching higher in the months ahead as it incorporates today’s price changes,” E.J. Antoni, a research fellow at the Heritage Foundation’s Grover M. Hermann Center for the Federal Budget, wrote on X, formerly Twitter.
Rental and owners’ equivalent rent costs have both increased nearly 24% since the start of the COVID-19 pandemic in March 2020, according to the Federal Reserve Bank of St. Louis (FRED). Cumulative inflation, meanwhile, is somewhat lower at 22%.
Inflation measured 2.9% year-over-year in July, the first time the headline number has fallen below 3% in over two years.
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