High Housing Costs Are Driving an Inflation Crisis Nationwide
Home prices rose by a staggering 18.8% in 2021, and rent also jumped 17.6% to a new high nationwide as housing supply bottomed out at a record low, Politico reports. In the wake of supply chain disruptions slowing new home construction, housing costs remain the biggest driver of runaway prices nationwide, pushing the consumer price index even higher.
The Fed’s decision to raise interest rates could cause a gradual decline in sales activity as a growing number of buyers are priced out of their local markets altogether, but until more supply is added to an overwhelmed market, economists worry that there is no clear end in sight for shelter inflation.
Housing advocates and industry lobbyists say the affordability crunch has reached crisis levels. More than 40 housing-related groups sent a letter to President Joe Biden on March 9 requesting that he convene a council on affordability made up of a “broad range of external stakeholders” and officials from seven different Cabinet departments.
“The cost of shelter is less affordable for everyone across the income spectrum, particularly for those least able to afford it,” they wrote. “High housing cost contributes, in part, to the current high levels of inflation and pushes homeownership and affordable rents out of reach for many.”