The rising cost of housing is one of three main factors driving rapid inflation in the U.S., according to data released by the U.S. Department of Labor last week.
The Department said the largest three items in household budgets – namely shelter, gasoline and food – all saw cost increases, helping to fuel the highest inflation rates in the country in February since 1982.
In February, the Consumer Price Index, which measures the fluctuation of the price of essential goods and services, jumped 7.9% from a year ago.
Bankrate Chief Financial Analyst Greg McBride told CNCB that there is “nowhere to hide”. “This is hitting everybody,” he added, “[with inflation] most pronounced on items that are necessities.”
Those necessities include household grocery bills, which are 8.6% more expensive now than they were a year ago. They also include gasoline prices, which are up 8.6% from the year before, and shelter costs such as rents, which now cost 4.7% more than they did this time last year.
Although the cost of shelter is up less than the others, it’s likely to have the biggest impact because it makes up for a larger proportion of most household’s costs. McBride noted that housing costs account for more than a third of most people’s budgets. Homeowners haven’t escaped either, with mortgage rates rising this week to an average of 3.85%, according to Freddie Mac.
“That comparatively benign increase … is likely to put the biggest squeeze on household budgets for the remainder of the year,”he said.
Add to that, the rise in the cost of gasoline doesn’t yet account for the latest increases at the pump that followed Russia’s invasion of Ukraine. The U.S. is now considering sanctions on Russian oil, which will likely drive up the costs of gas further. We also don’t know yet what impact the war will have on the economy overall, but most experts say it will result in higher inflation still.
“While it’s too soon to know how the war in Ukraine will affect the U.S. economy, it seems that it will continue to put upward pressure on inflation,” Nadia Evanelou, senior economist and director of forecasting at the National Association of Realtors, said in a blog post last week.
In an attempt to try to tame inflation, the Federal Reserve is expected to start raising its short-term interest rates next week.