The Consumer Price Index (CPI) is up to a 40-year high after a gain of 7.9% over the past 12 months, impacting everything from household goods to building materials and rental costs, NAHBNow reports. Building materials in aggregate have risen 20.4% over the last year and 31.3% since January 2020, and sharper increases are on the way.
The Federal Reserve enacted its first federal funds rate hike in March, causing a 25 basis-point increase in the short-term interest rate, and economic projections from the central bank point toward six additional 25 basis-point increases throughout 2022.
The broadest measure of inflation, the Consumer Price Index (CPI), is up 7.9% over the last 12 months, reaching a 40-year high. Although this rate of inflation should ease, albeit slowly, it will remain above the Federal Reserve’s target for price changes. This is particularly true for housing rents, which make up approximately one-third of overall inflation data. Rents are rising quickly, and those increases will persist in the CPI data as leases are renewed in the coming year.
In addition to construction cost challenges, higher mortgage rates will further reduce housing affordability conditions. New home sales declined 2% in February because of these factors. Nonetheless, builder confidence remains solid at a level of 79, per the NAHB/Wells Fargo Housing Market Index.
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