Housing EconomyNew This WeekNewsletter

Inflation Falls Below 5% For First Time in Two Years

For the first time in two years inflation has fallen below five percent. April has also marked the tenth consecutive month of deceleration.

According to Eye On Housing, the Fed’s ability to address rising housing costs is limited as shelter cost increases are driven by a lack of affordable supply and increasing development costs. Additional housing supply is the primary solution to tame housing inflation. The Fed’s tools for promoting housing supply are at best limited. In fact, further tightening of monetary policy will hurt housing supply by increasing the cost of AD&C financing. This can be seen on the graph below, as shelter costs continue to rise despite Fed policy tightening. Nonetheless, the NAHB forecast expects to see shelter costs decline later in 2023.

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