Latest Consumer Price Inflation

  • Inflation ticked higher in March, with the consumer price index increasing by 1.5 percent from one year ago. The current inflation is not troublesome – yet.
  • The Fed keeps a closer watch not on the broadest measure of inflation but a narrower one that excludes food and energy prices. This so-called core inflation rose 1.6 percent from one year ago, but the monthly gains were picking up fast with the March annualized rate clocking at 2.5 percent, the highest pace in over a year.
  • Apartment rents grew by 2.9 percent. The murkier, but important, figure of homeowner equivalency rent rose by 2.6 percent, the highest gain in nearly 6 years! The continuing fall in apartment vacancy rates combined with the general housing shortage assures even a higher rent and homeowner equivalency rent for the remainder of the year.
  • Home prices have also been rising quite fast. The NAR median home price rose 9 percent in February. The Case-Shiller index showed a 13 percent higher home price in January. The home price increases, however, are not counted as part of the consumer price trends because, like the stock market, a house is considered as an investment asset by government statisticians.
  • Gasoline prices were lower by 4 percent. But that was offset by a strong 16 percent gain in piped-gas utility price.
  • The price of meat is rising quite fast at a 5 percent rate. The price of veggies and fruits are rising at less than 1 percent. In the current economy, that is, vegetarians are faring better than meat eaters. If, however, there is a disruption to planting and harvest in Ukraine – historically the most fertile land in Europe – then the veggie prices will bite consumers next year.
  • Watch the housing rent component very carefully. If it begins to accelerate upwards then the Federal Reserve may be forced to raise the short-term interest rates much sooner than the current planned timeline of mid-2015. Higher mortgage rates, sooner, will also be in the offing in such a case.



Lawrence Yun, PhD., Chief Economist and Senior Vice President

Lawrence Yun is Chief Economist and Senior Vice President of Research at NAR. He directs research activity for the association and regularly provides commentary on real estate market trends for its 1 million REALTOR® members.

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