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Housing Inflation Could Remain Elevated for Longer Than Expected—Here’s Why

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Economics

Housing Inflation Could Remain Elevated for Longer Than Expected—Here’s Why

Inflation appears to be easing, but the latest consumer price index reveals that shelter costs, which account for a third of the total CPI, aren't budging


November 16, 2022
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Image: Stock.adobe.com

The consumer price index rose 7.7% year-over-year in October, and while that reading is historically high, it was also the smallest measurement of inflation recorded since January, according to CNBC. October’s monthly increase has some housing experts wondering if inflation may finally be easing, but even if that’s the case, it could take a significant amount of time for home prices to correct.

The cost of shelter jumped by 0.8% in October, the largest monthly gain in 32 years, and shelter inflation is likely to remain elevated for months to come due to housing’s massive influence on consumer spending.

Housing is the single biggest chunk of spending for the average consumer. The overall CPI weighting reflects that: Shelter accounts for 33% of it, the most of any category. Shelter therefore has an outsize impact on overall inflation from month to month.

The shelter category is up 6.9% in the last year.

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