Florida housing costs are the primary cause of inflation in America.
Miami, Fort Lauderdale, and West Palm Beach have the highest rate of inflation among metro areas with more than 2.5 million residents. In the 12-month period ending in April, the rate was 9%.
According to the Consumer Price Index, this is more than twice the national average of just 4%—the Tampa-St. Petersburg-Clearwater metro had the third-highest inflation rate in the country, at 7.3% for the year ending in May.
The rate of inflation in urban Hawaii is 2%, which is the rate set by the Federal Reserve for the Personal Consumption Spending Index. The Federal Reserve has established this as the target for the Personal Consumption Spending Index.
Here are some notable inflation trends for the biggest metros in the US and the dynamics behind those shifts.
Sunshine State’s Inflation Problems
Florida’s population growth is driving up housing costs, which has, in turn, pushed up inflation. According to economists, this trend increased following the pandemic, as Americans were able to move because of remote work.
“A lot of people are still coming to Florida because the economy is robust, and many like that we don’t have an income tax like in New York, for example,” said Amanda Phalin, an economist at the University of Florida. “And in places like Miami, we’re seeing a lot of real estate demand from non-Floridians or non-American investors — generally wealthy folks who want to have a nice home here.”
Florida’s population grew the most of any state from July 2021 to July 2022 because of domestic migration, according to the Census Bureau’s latest estimates. During that same period, Florida also had the fastest population growth by percentage, the first time it has notched that top spot since 1957.
Housing costs make up nearly a quarter of the Consumer Price Index of the Labor Department. This index includes housing costs which are almost a quarter.
Phalin explained that rising housing costs were due to several factors, such as the increase in interest rates and the lack of housing stocks. This is particularly true for cities like Miami.
Phalin stated that these factors were causing pressure to rise on both the rental market and the purchasing market. “A number of homes are being converted into Airbnbs, and some homeowner associations forbid people from renting their homes out. ”
Many residents of cities like Miami and Tampa Bay have been living in the city for many decades, or even their entire life. They are now facing an affordability problem.
Progress On Inflation
Minneapolis and St. Paul are also plagued by high housing costs. These metro areas are the ones with the lowest inflation rates.
Tyler Schipper is an expert in housing costs. He is an associate professor of Economics at the University of St. Thomas in Minneapolis. Tyler Schipper stated that the housing costs in Minneapolis rose faster and peaked earlier than the national average.
The Bureau of Labor Statistics’ calculation of the CPI housing cost, and the way in which it tabulates data for different regions all play a part.
The shelter is given a high weighting in the CPI. Rents are not changed often and CPI data is collected less frequently.
This could be the reason for the divergence, according to him. He believes the inflation peaked in both [the Twin Cities] and across the country at the same time, but that it fell faster here.
Last year, multifamily permits made up nearly half of the total housing permits issued in the Federal Reserve Bank of Minneapolis’ district, which spans the Upper Midwest into the Mountain West. The activity — which was the highest share on record for that district, the regional Fed noted — is particularly evident in southeastern Minnesota, where large apartment projects are flourishing throughout the Twin Cities.
The Federal Reserve Bank of Minneapolis district spans Upper Midwest and Mountain West. Last year, the Fed reported that the district’s activity was at an all-time high. Apartment construction in the Twin Cities, southeast Minnesota, is booming.
Schipper said residents of the Twin Cities might not be aware that they have one of the lowest rates of inflation among major cities.
Latoya Rods, a Minneapolis resident, said she buys most of her groceries from Sam’s Club or Costco.
On a Target run in South Minneapolis, she told me that “I budgeted heavily because everything today is so expensive.”
Still High But Getting Better
The Atlanta-Sandy Springs/Roswell metro area was America’s inflation center at one time.
Atlanta’s inflation was driven by the same factors that fueled inflation in other Southern cities. The growth in population was driven by Americans leaving expensive coastal cities.
The housing market is more equalized as migration to the city declines.
Atlanta’s inflation rate ended April at 5.8%, which is about half the peak of 11.7% it reached in August 2021.
Kaiji Chen is an Emory University economist.
He said that a fall in transportation costs has also contributed to Atlanta’s lower inflation rate.
