The sharp spike in post-pandemic US housing inflation just might be ending.
Shelter costs rose 8 percent in May over a year earlier, according to the government’s latest Consumer Price Index report on Tuesday.
While that doesn’t seem like good news, annual housing inflation as measured by CPI has slowed for two straight months after peaking at 8.2 percent in March. That ends a run of increases dating to February 2021.
“We’re clearly past peak inflation on the housing front,” said Gregory Daco, chief economist at Ernst & Young, in an e-mail. “We knew the disinflationary process on the housing front would take some time, but it is now unfolding.”
Advertisement
The main components of the CPI shelter index are rent and owners’ equivalent rent, a calculation of what homeowners would pay to lease their residences. (The purchase price of a home is considered an investment and not included in CPI.) Shelter accounts for about one-third of CPI, and it was a primary driver of the 4 percent annual increase in inflation last month.
Rent increases began to slow in 2022, according to data tracked by private firms. Forecasters cautioned that the trend wouldn’t show up in the CPI data for as much as a year due to lags associated with the way the shelter index accounts for rent. The year-over-year surge in Zillow’s index of asking rents topped out at 17 percent in February 2022; it has since cooled steadily, recording an increase of 4.8 percent last month.
It has been a different picture locally, however.
In the Boston area (including Cambridge and Newton), CPI shelter costs climbed an annual 7.5 percent in May. That’s a more moderate pace than the national rate, but it marked a continuation of the acceleration the region has seen this year.
Advertisement
Over the first five months of the year, the median Boston rent was up 7.2 percent, compared with a 5.1 percent increase during the same period last year, according to rent tracker Apartment List. Nationally, the year-to-date gain was 1.9 percent.
Boston has always been an expensive place to live, but the shortage of single-family homes and apartments relative to many other parts of the country is now squeezing residents particularly hard.
As the Globe’s Andrew Brinker has reported, many potential home sellers are holding off because they don’t want to give up their low mortgage rates.
That has left inventories exceedingly tight, propping up not only home prices but rents as well. With so few homes on the market and mortgage rates significantly higher than last year, apartment demand is strong.
But conditions may start to improve.
The year-over-year increase in Boston’s median asking rents has declined each month in 2023, according to Zillow, from 15 percent in January to 7.7 percent in May.
And the median-priced single-family home in the region sold for $820,000 in April, down roughly 3 percent from a year earlier, according to the most recent data from the Greater Boston Association of Realtors. The median condominium price fell about 1 percent to $710,000.
Housing inflation remains a painful problem in metro Boston. But some relief is likely on the way.
Larry Edelman can be reached at larry.edelman@globe.com. Follow him on Twitter @GlobeNewsEd.