Rising inflations costs in FL: South Florida shoreline – Courtesy: Shutterstock – Image by pisaphotography
Florida, where housing costs are consistently out of control, is currently the inflation hotspot in the United States.
With a 9 percent inflation rate for the year that ended in April, the Miami-Fort Lauderdale-West Palm Beach region has the highest inflation rate among metro regions with more than 2.5 million inhabitants.
According to information from the Consumer Price Index, that is more than twice as much as the national average of 4 percent. At 7.3 percent for the year that ended in May, the Tampa-St. Petersburg-Clearwater metro area had the third-highest inflation rate in the nation.
However, there have been some positive developments in other urban regions. Minneapolis had the lowest annual inflation rate of the 23 metro regions for which the Labor Department provides data in May, at 1.8 percent. At 2 percent, urban Hawaii’s inflation rate was the second-lowest, matching the Federal Reserve’s target for its preferred inflation indicator, the Personal Consumption Expenditures index.
Here are some noteworthy inflation patterns for the largest U.S. metro areas and the factors that contributed to those changes.
Sunshine State grapples with a frustrating inflation issue
The state of Florida’s expanding population has been driving up inflation, especially through housing expenditures. According to analysts, this trend picked up speed during the epidemic when remote employment allowed some Americans to migrate.
According to Amanda Phalin, an economist at the University of Florida, “many people are still coming to Florida because the economy is really strong, and many like the fact that we don’t have an income tax like in New York, for example.” And in cities like Miami, we’re noticing a lot of interest in real estate from non-Floridians or non-American investors — typically wealthy people who want to own a great home here.
According to the most recent estimates from the Census Bureau, domestic migration caused Florida’s population to increase more than that of any other state between July 2021 and July 2022. For the first time since 1957, Florida also experienced the fastest percentage of population growth during that time.
Nearly a third of the Consumer Price Index, which measures housing expenses, is determined mostly by population growth. A local economy’s demand for housing, services, and transportation increases when new residents move in. Inflation rates have increased as a result.
Housing expenses have also increased, according to Phalin, as a result of rising loan rates, a shortage of homes in locations like Miami, and more expensive property insurance.
All of these reasons are pushing prices upward in both the rental and purchase markets, according to Phalin. Because “many homes are converting themselves into Airbnbs and some homeowner associations prohibit people from renting out their homes,” she continued, “there is a shortage of available rental units.”
All of this has led to an increasing affordability problem for locals who have spent decades or their entire lives living in areas like Miami and Tampa Bay.
Inflation reduction progress
In Minneapolis and St. Paul, the metro area with the lowest inflation rate, housing expenses are a significant factor as well.
Tyler Schipper, an associate professor of economics at the University of St. Thomas in Minneapolis, claimed that shelter costs increased more quickly and peaked earlier in Minneapolis. They reached their peak around six months earlier than the rest of the nation on average.
The way the Bureau of Labor Statistics calculates housing expenses for the CPI and the time of when readings are gathered for different locations are likely other contributing factors.
In the CPI calculations, housing is given a lot of consideration. The fact that rents fluctuate so infrequently (many leases are for 12 months, and rents normally go up when a tenant leaves) and that data is only gathered infrequently (every six months as opposed to monthly or every two months for other CPI items) results in a considerable lag.
Inflation “peaked at about the same time for [the Twin Cities and the nation], but it just has dropped off faster here than in the rest of the country,” he claimed, which is what’s causing the disparity.
An increase in multifamily construction has aided in that, increasing the supply of units and lowering rents in the process.
In the district of the Federal Reserve Bank of Minneapolis, which extends from the Upper Midwest into the Mountain West, roughly half of the total number of housing permits issued last year were multifamily permits. The activity, which the regional Fed said was the biggest share on record for that district, is especially noticeable in southeast Minnesota, where sizable apartment buildings are booming all over the Twin Cities.
Although the Twin Cities now have the lowest inflation rate among major cities, Schipper noted residents might not feel that way.
As a result of the CPI’s heavy reliance on housing, he explained, “our overall numbers still looked really good, but those food prices went up and stayed up relative to other metro areas.” If the cost of groceries is still rising, it will be difficult to persuade them that inflation is decreasing.
Latoya Rogers, a native of Minneapolis, finds little price relief while shopping for groceries or other household items. The majority of her shopping is done at Costco or Sam’s Club, she added, with the exception of picking up one or two items if she’s close to a Target or a Cub grocery store.
She added as she hurried to Target in south Minneapolis, “I budget a lot since things are so pricey these days. “Buying in bulk will make your money last longer.”
Still high, but improving
The Atlanta-Sandy Springs-Roswell metro area was formerly the center of American inflation.
Atlanta’s inflation increased for the same reason that it did in other Southern cities: a rise in the population brought on by Americans emigrating from pricey coastal places.
Nevertheless, inflation in this metro area has decreased significantly over the past year as migration into the city has slowed and the property market in the area has improved the equilibrium between supply and demand.
Inflation in Atlanta was 5.8 percent in the year that ended in April, which is less than half of the 11.7 percent peak it reached in August 2022.
“If you look at the data, housing inventory in Atlanta has increased quite a bit from a year ago, so there’s a lot more supply in the market, while the number of sales has been declining,” said Kaiji Chen, an economist at Atlanta’s Emory University.
Atlanta’s inflation rate was also slowed down by a decline in transportation expenses, he claimed.
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Mike has more than 30 years of experience in marketing and public relations. He once owned his own agency and has worked with some of the largest brands in the world.
