This is why it may take some time for housing inflation to cool down

An ‘open house’ flag is displayed outside a single family home on September 22, 2022 in Los Angeles, California.

Allison Dinner | Getty Images

There are signs that inflation may decrease further in the coming months, but housing threatens to silence any improvement.

The consumer price index, a key barometer of inflation, changed to +7.7% in October from a year ago. While still relatively high by historical standards, the annual reading was the smallest since January.

The monthly increase was also smaller than expected – giving hope that inflation is stubbornly high, and the negative impact on consumers’ wallets, maybe easing.

Yet housing costs jumped by 0.8% in October – the biggest monthly gain in 32 years. That may seem counterintuitive at a time when many observers say the U.S. is in “housing recession.”

But shelter inflation – as reflected in the CPI, at least – is likely to remain elevated for several months to a year given its importance in household budgets and the intrinsic dynamics of the rental and housing market, said economists.

“As the housing market cools, this category will also be comfortable but we may have to wait until next year before meaningfully dampens headline inflation,” said Jeffrey Roach, chief economist for LPL Financial.

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The rental and housing markets are cooling

Swelling demand has caused home prices and rents to cool or moderate in many parts of the United States

New US home listings in the month, through Nov. 6, were down 17.5% compared to the same period a year earlier, according to to Redfin, a real estate brokerage. The typical sale price, $359,000, is down more than 8% from its peak of $392,000 in June, according to Redfin.

Mortgage request has fallen as rates steadily rise to a recent peak over 7%despite the cost rejected sharply last week.

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Meanwhile, rental inflation has slowed in 2022 from its breakneck pace last year, Zillow data shows.

Americans pay an average of $ 2,040 rent market October 31, according to Zillow observed Rent Indexwhich is seasonally adjusted.

That rental price rose 0.31% from a month earlier, on September 30. But the pace of growth has slowed for four consecutive months. By comparison, rents have jumped about 1% in the month from the end of May to the end of June. Rental inflation hit 2% a month in July and August 2021, according to Zillow data.

Why shelter prices lag

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