Economists' Outlook

Housing stats and analysis from NAR's research experts.

Instant Reaction: Consumer Price Index, August 11, 2021

"Inflation continues to rise quickly in July. Over the last 12 months the inflation rate rose 5.4%, the same annual rate as in June. Nevertheless, the monthly pace slowed down. Specifically, consumer prices rose by 0.5% from the previous month compared to 0.9% in June. In the meantime, economists and policymakers typically pay close attention to core inflation, which excludes volatile food and energy prices. In July, core inflation retreated to 4.3% from 4.5% last month. Although there is a lot of uncertainty, inflation is more likely to cool off in the following months. The National Association of REALTORS® expects consumer price growth to average 4.5% in 2021.

Parsing out by expenditure category, we are seeing that core inflation rose mostly due to surging prices for used cars (41.7%) and airline fares (19.0%). Although rent prices continue to grow more slowly than during the pre-pandemic period, this may change in the following months as jobs are coming back strongly. In the meantime, record high home prices (not included in the CPI) hurt affordability, delaying the transition to homeownership for many renters. While rental vacancies are falling, this translates to higher rental demand, which is expected to push up rent prices."

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