Housing Costs Surge In July, Accounting For 90% Of Total Inflation

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.

“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.

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.