The Consumer Price Index (CPI) increased 0.2% in June, following another 0.1% jump in May. but core CPI rose only 0.2% month-over-month compared to 0.4% in May, according to Orphe Divounguy of Zillow. Consumer prices were only 3% higher year-over-year, down from 4% in May 2023. Market rent growth also fell to 4.1% from its 16% high in February 2022.

Despite market rent growth decreasing, Jeff Cox of CNBC reports on the data, noting that the shelter index rose 0.4% in June, up 7.8% year-over-year. According to Cox, this monthly gain also accounted for 70% of the total increase in headline CPI.

Source: CNBC (July 2023)

Catarina Saraiva of Bloomberg (subscription required) quotes Federal Reserve Bank of Chicago President Austan Goolsbee as saying the recent consumer-price data showing inflation easing was “promising.” However, inflation is still higher than the 2% goal. “It’s at least promising that this week we got inflation numbers that show inflation is coming down at a pretty rapid clip…It’s still higher than where we want it.”

Danielle Hale of Realtor.com also comments on the trend, noting that although shelter inflation accounts for a significant portion of core inflation, it is decelerating at a pace that gives hope for further moderation of inflationary pressures. “In other words, the monthly rate of change [of shelter inflation] has been cut in half, and with rents receding and a near-record amount of rental housing supply on the way, I expect further weakness in rents.”

Bryan Mena and Alicia Wallace of CNN report that Florida is the state experiencing the highest inflation rate due to increasing housing costs. “The Miami-Fort Lauderdale-West Palm Beach area has the highest inflation rate of metro areas with more than 2.5 million residents, with a 9% inflation rate for the 12 months ended in April. That’s more than double the national average of 4%.”

Housing prices

According to new data from CoreLogic, housing prices in the U.S. increased year-over-year by 1.4% in May 2023. Further, CoreLogic’s forecast indicates that home prices will continue to increase by 1% from May 2023 to June 2023 and 4.5% year-over-year from May 2023 to May 2024. The predicted annual increase in housing prices is expected to favor Eastern markets:

Source: CoreLogic (July 2023)

Hannah Jones of Realtor.com reports on housing prices, noting that they expect stability in housing prices over the coming year, not the wild swings we’ve seen in the past few years. Median listing prices fell year-over-year, although the decline has slowed. “The annual decline in home prices has moderated over the last few weeks as the matchup between buyer demand and limited for-sale inventory keeps prices afloat.”

Diana Olick of CNBC reports on Black Knight housing price data showing a bit more bullishness on rising home costs. According to Black Knight data, home prices hit a record high in May, increasing 0.7% nationally month-over-month.

“The sharp jump in mortgage interest rates last year threw cold water on an overheated housing market, but it didn’t last long. Even with rates still high, home prices are now gaining again, and the gains are accelerating with each new month.”

Dana Anderson of Redfin reports on its own housing data showing that the median U.S. home-sale price rose 1.5% year-over-year, the first increase in almost five months.

Source: Redfin (July 2023)

“Prices are rising despite relatively low demand because there are so few homes for sale. New listings are down 27% year over year, the biggest drop since the start of the pandemic, and the total number of homes on the market is down 14%, the biggest drop since March 2022. That’s mostly because potential sellers are locked in by low rates; nearly all homeowners have a rate below 6%.” 

Rent update

Although growth is moderating, rents are also seeing small increases nationwide. Zumper reports that the one-bedroom rent average of $1,504 remained flat month-over-month, but two-bedroom rents increased 0.3% to $1,891. Zumper notes that at 5.8%, the one-bedroom year-over-year increase is the smallest gain in 2 years.

Source: Zumper (July 2023)

Zumper CEO Anthemos Georgiades comments:

“This deceleration is, generally, good news for renters, but it does come with caveats…Many cities are still stabilizing after long periods of sharp increases during the pandemic’s Great Migration, and though rents are softening they’re still at record highs in many markets.”

Lily Katz of Redfin reports on rents, highlighting that rent growth is decelerating but that national rents are still only $24 less than their previous highs. 

Source: Redfin (July 2023)

Redfin Deputy Chief Economist Taylor Marr comments on the rent data: 

“The housing market tends to be ‘downside sticky,’ which means rents don’t typically fall much even when renter demand pulls back…Instead of lowering rents when business is slow, many landlords offer perks like a free month’s rent or discounted parking, which tends to be less of a hit to profits. The steep slowdown in rent growth over the last year is providing some relief for renters, who now have more room to negotiate as their landlords grapple with rising vacancies. But with rents near their record high, most renters still aren’t finding big bargains.”

Apartment List reports on vacancy rates, highlighting that its vacancy index sits at 7.2%, matching the peak vacancy rate seen at the height of the pandemic. Because there is a record number of multifamily units under construction, Apartment List predicts that vacancy rates will remain elevated, putting downward pressure on rents. This is already seen in the deceleration of rent inflation noted in the recent inflation data.

Source: Apartment List (July 2023)