Why Inflation Fears Are Growing
Lawrence Yun | July 1, 2016
Inflation is up by 1.1 percent through the first half of the year, and economists anticipate it will to continue to rise well into 2017. Rising inflation is expected to have a widespread impact for the economy, particularly the housing market. Lawrence Yun, chief economist of the National Association of REALTORS®, writes in his monthly Forbes.com column. Read more: 4 Housing Predictions for the Rest of 2016 “One consistent area of inflationary concern is arising out of housing,” Yun writes. “Rents increased by 3.8 percent in June, the strongest pace since January of 2008.” Apartment vacancy rates continue to be very tight, which means renters likely won’t see a decrease in rental costs anytime soon. For those looking to buy, they’ll face plenty of challenges too. Home values are climbing quickly. Home prices nationwide have increased around 5 percent to 6 percent this year – on top of the 20 percent increase that occurred in the three years prior, Yun notes. Given limited inventories of homes for sale, home prices aren’t likely to drop anytime soon either, Yun adds. “Going forward, a major driver of inflation will be related to housing,” Yun notes. “With inadequate new housing construction, both rents and home prices will easily outpace the general inflation. … Housing costs, moreover, weigh a hefty 33 percent on the overall consumer price index, compared to 14 percent weight for food, 7 percent for energy, and 6 percent for transportation.”
Source: Forbes.com