Despite overall inflation decreasing in August, housing costs, including rent and owners’ equivalent rent, surprisingly surged.
This unexpected increase accounted for over 70% of total inflation, raising concerns about the persistent impact of housing costs on the economy.
Experts find it puzzling, as new lease prices peaked over a year ago, and this acceleration defies expectations.
Read: Inflation Eases In August Amidst Economic Slowdown Concerns
“This is actually quite mysterious how things like OER [owners’ equivalent rent of residences] are accelerating now,” UBS senior economist Brian Rose told Yahoo Finance. “So the actual data on leases, we have this high-frequency data showing when people are signing new leases, what their rents are. You know, that peaked out almost two years ago. And to see the OER accelerating at this point is very strange, very difficult to explain.”
Read: Big Lots Files For Bankruptcy, Blaming High Inflation Under Biden-Harris Admin
This surge in housing costs also contributed to a higher-than-expected rise in core inflation, which could influence the Federal Reserve’s decision on interest rate cuts in their upcoming meeting.
Overall, housing costs have increased significantly since President Biden took office, highlighting the ongoing challenge of housing affordability in the U.S., likely driven by a significant shortage of housing units nationwide.
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