Economists' Outlook

Housing stats and analysis from NAR's research experts.

Instant Reaction: Consumer Price Index, May 12, 2021

"Inflation rose more than expected in April to the fastest pace since 2008. Over the last 12 months, inflation rate rose 4.2%, compared to 2.6% in March and 1.7% in February, respectively. In the meantime, economists and policymakers typically pay close attention to core inflation, which is the overall inflation rate excluding Food and Energy. In April, core inflation also rose to 3.0%, well above the Federal Reserve's 2.0% core target. Nevertheless, remember that the Fed has reassured that it will allow inflation to run above the 2% goal since it has been below that target for more than a year.

We pointed out multiple times that inflation would have higher readings especially for the period from March through May due to the base effect. Last year, prices were weak as nearly all states were under pandemic-related restrictions. The Fed anticipates this pickup in inflation will be temporary. Nevertheless, the Consumer Price Index (CPI) also rose more than expected in the month-over-month figures, adding concerns about higher inflation for a longer period. Thus, inflation is one of the economic indicators that will be closely monitored for the next several months.

In the meantime, rent growth was flat in April after decelerating — rising at a slower pace — for several months. Rents rose by 1.8% over the past 12 months to April at the same pace as in March. This could also mean that we may see rent growth pick up in the following months, meaning that demand for rental homes will likely increase. In contrast, median home prices — not included in the CPI measure — rose by a record-breaking annual pace of 17% to a historic high, with nearly every metropolitan area posting price increases in the first quarter of 2021, according to NAR."