The Relationship Between Housing Inflation and Overall Inflation
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Shelter inflation is the measure of price growth specific to housing. It comes from a survey of renters and homeowners that’s done by the Bureau of Labor Statistics (BLS). The survey asks renters how much they’re paying in rent, and homeowners how much they’d rent their homes for, if they weren’t living in them.
Much like overall inflation measures the cost of everyday items, shelter inflation measures the cost of housing. And for four consecutive months, based on that survey, shelter inflation has been coming down (see graph above):
Why does this matter? Well, shelter inflation makes up about one-third of overall inflation, as measured by the Consumer Price Index (CPI). So, when shelter inflation moves, it leads to noticeable moves in overall inflation. That means the recent dip in shelter inflation might be a sign that overall inflation could fall in the months ahead.
That moderation would be a welcome sight for the Federal Reserve (the Fed). They’ve been working to get inflation under control since early 2022. While they’ve made some headway (it peaked at 8.9% in the middle of last year), they’re still trying to get to their 2% goal (the latest report is 3.3%).
A Brighter Future for Mortgage Rates?
As Mortgage Professional America (MPA) explains:
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“. . . mortgage rates and inflation are connected, however indirectly. When inflation rises, mortgage rates rise to keep up with the value of the US dollar. When inflation drops, mortgage rates follow suit.”
While no one can predict the future for mortgage rates, it’s encouraging to see the signs of moderating inflation in the economy.
Bottom Line
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Source: https://www.mykcm.com/blog/how-inflation-affects-the-housing-market#mortgage #HousingMarket #InflationRate #Inflation #HousingMarket #bostonrealestate #LocalExpert #topbostonagent #newblog #realestateblog #homebuying #homebuyer #HomeBuyerTips #homebuyerworkshop #homebuyerguide #homebuyerspecialist #homebuyerjournals #homebuyer101 #homesaleprices