Current:Home > MarketsHousing costs continue to drive inflation even as food price hikes slow-InfoLens
Housing costs continue to drive inflation even as food price hikes slow
View Date:2024-12-23 16:45:02
Mitchell and Kathryn Cox, mid-20s professionals in Savannah, Georgia, thought that they’d entered the rental market “at the worst time possible,” with skyrocketing prices pushing their monthly cost up more than 50% higher than their friends and relatives who’d gotten into leases just a few years earlier.
Then the Coxes started to house hunt.
“We were doing a good bit of research and we knew where everything was trending so we weren’t surprised by the prices as much as we were disappointed,” Mitchell said, adding that after months of searching, the couple bought a home that was smaller than what they'd hoped for. “We kept comparing the home prices and mortgage rates of our relatives that bought just a few years before. We were just late on the home game.”
Around the country, high housing costs are turning a normal rite of passage for a young couple into a game of grit and chance. Consumer prices continued to cool in July, the Department of Labor said Wednesday. But shelter costs were 5.1% higher compared to a year ago, accounting for nearly 90% of the gain in overall inflation.
Data from real estate brokerage Redfin show that median home purchase prices nationally were up over 4% in the 12 months to July. Earlier this month, the government reported that overall average hourly earnings rose 3.6%.
Learn more: Best personal loans
“The (housing) market has been savage,” said Michael Neal, a senior fellow at the Housing Finance Policy Center at the Washington DC-based Urban Institute. Neal believes affordability challenges in housing are undermining overall economic growth by suppressing sales and construction.
CPI:CPI report for July is out: What does latest data mean for the US economy?
High prices and interest rates make for hard choices
A combination of higher prices and higher rates meant the Coxes had to make some hard decisions. They could have the location they wanted or the amount of space, but not both.
Ultimately, they opted for a “small but cozy” house in a neighborhood they loved, trading down from a 2-bedroom, 2-bath, to a 2-bedroom 1-bath with nearly 200 fewer square feet.
“We are blessed to be in the financial situation we are to be able to afford a home,” Mitchell said. “I recognize that not a lot of people can do the same thing. It takes diligence and honestly some luck.”
Like many other experts, Redfin chief economist Daryl Fairweather believes the inflation figures out Wednesday solidify the case for the Federal Reserve to begin cutting interest rates as soon as September. That will grant relief to a stalled market, she thinks, and we should see “significantly” better activity by next spring.
Higher prices aren’t just holding back would-be buyers, however. A smaller buyer pool isn’t good for sellers either, said Justin Vold, a Redfin agent in Los Angeles. “It’s in the seller’s best interest to price well enough to get multiple offers. Getting only one offer sounds great, but anything can happen.”
Vold has seen multiple deals fall apart in recent months. If interest rates move even slightly higher between the time that a buyer gets preapproved and when the deal goes to close, it may fall apart. For that reason, he often counsels buyers to house hunt at price points well below their budget, an approach that may be easier said than done, especially in the most expensive areas of the country.
Homeowners and buyers should keep an eye out for opportunities
Right now, Fairweather says would-be buyers should be watching rates and listings to decide when they’re comfortable jumping into the market, she said. And homeowners who bought recently should also look for opportunities to refinance to lower rates if they’ve accrued enough equity.
Wednesday’s inflation data is “just another reminder of how important housing is to the economy both in terms of prices and real activity,” the Urban Institute’s Neal said. More to the point, he says, it’s a reminder of just how starved for supply the housing market is at all levels and price points.
veryGood! (144)
Related
- Disease could kill most of the ‘ohi‘a forests on Hawaii’s Big Island within 20 years
- What's Making Us Happy: A guide to your weekend viewing, reading and listening
- Official suggests Polish president check social media security after odd tweet from private account
- Suit challenges required minority appointments to Louisiana medical licensing board
- Michael Grimm, former House member convicted of tax fraud, is paralyzed in fall from horse
- Is 'the spark' a red flag? Sometimes. Experts say look for this in a relationship instead
- Mario Zagallo, the World Cup winning player and coach for Brazil, dies at age 92
- Fire in Elizabeth, New Jersey: Massive blaze engulfs industrial warehouse: See photos
- California voters reject proposed ban on forced prison labor in any form
- Researchers team up with mental health influencers to reach young people online
Ranking
- Japan to resume V-22 flights after inquiry finds pilot error caused accident
- New Mexico attorney general says fake GOP electors can’t be prosecuted, recommends changes
- Jeff Landry’s inauguration moved to Sunday at 4:30 p.m. because of expected severe weather
- Man who lunged at judge in court reportedly said he wanted to kill her
- Bowl projections: SEC teams joins College Football Playoff field
- After 16-year restoration, Greece unveils palace where Alexander the Great became king
- Trump should be barred from New York real estate industry, fined $370 million, New York Attorney General Letitia James says
- Baltimore celebrates historic 20% drop in homicides even as gun violence remains high
Recommendation
-
NFL Week 10 injury report: Live updates on active, inactive players for Sunday's games
-
NBA trade deadline buyers and sellers include Lakers, Pistons
-
Ex-Capitol Police officer Harry Dunn announces congressional run in Maryland
-
WWII-era munitions found under water in survey of Southern California industrial waste dump site
-
New Mexico secretary of state says she’s experiencing harassment after the election
-
Ohio State football lands transfer quarterback Will Howard from Kansas State
-
Microsoft adding new PC button in its first significant keyboard change in decades
-
Will Taylor Swift add a Golden Globe statue to sit next to her 12 Grammys?