Shelter presents a bit of an economic paradox. U.S. housing market activity has been slowing for 1½ years. Yet rents continue to climb quickly and related lodging costs remain volatile, contributing to still-too-high rates of headline inflation.
On the slowing-activity front, the U.S. Commerce Department’s Bureau of Economic Analysis (BEA) estimated that over July through September, the housing market contracted for a sixth consecutive quarter. And the downturn (–26% on an annualized basis) accelerated for a third straight quarter, according to BEA’s first reading of third-quarter gross domestic product.
As for costs, the shelter component of the Consumer Price Index (CPI) rose 0.8% in October—its largest monthly change in more than 30 years, according to the U.S. Labor Department’s Bureau of Labor Statistics (BLS). Shelter accounted for more than half of the CPI’s 0.4% monthly rise, BLS reported. Over the 12 months ended October 31, the cost of shelter increased 6.9%.2