As Inflation Rate Slows Again, Housing Still Biggest Driver

Shelter costs remained the largest contributor to an increase in the monthly Consumer Price Index, even as apartment rental growth has started to cool nationwide


Consumer prices rose 4 percent in May compared to the same time last year in the smallest annual increase in two years, according to a Bureau of Labor Statistics (BLS) report released Tuesday.

While housing costs remained the biggest driver of higher prices for U.S. consumers, apartment rent growth has begun to cool nationwide and could help further ease inflation this year, The Wall Street Journal reported. 

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The cost of all U.S. goods and services rose 0.1 percent monthly in May, slower than its 0.4 percent increase from March to April, according to the BLS’s Consumer Price Index

While overall costs rose less than economists expected, housing represented the “largest contributor” to higher prices, followed by more expensive used cars and trucks. The shelter index, which measures the cost of home ownership or renting, rose 8 percent in May compared to a year before, double the overall consumer price increase of 4 percent, according to the BLS.

New Yorkers in particular have been hit by higher housing expenses, with the median rent in Manhattan reaching a record high of $4,395 in May, according to a report from appraisal firm Miller Samuel. Increased prices for apartment renewals have helped push rent higher nationwide, WSJ reported.

But the tide has finally started to turn: Apartment rental growth nationwide is rapidly cooling thanks to lower prices on new leases, WSJ reported. Asking rents on new leases rose slightly less than 2 percent in the U.S. over the 12 months ending in May, compared to an average increase of 18 percent from 2020 to 2022, according to WSJ.

Slower rental growth indicates the housing market is returning to a more normal state after huge increases in rent and home prices during the pandemic, said Tomasz Piskorski, a professor of real estate at Columbia University Business School. But that slowdown isn’t yet reflected in the Consumer Price Index because it doesn’t use the most recent data, Piskorski said.

“We are essentially deflating from very big price increases during COVID,” he said. “I wouldn’t be surprised and I wouldn’t see any problem in some declines in housing prices and rents towards more of the long-term average.”

Slower inflation and cooling housing prices could also prevent the Federal Reserve from raising interest rates again at its meeting Wednesday, or even drive the central bank to “slash rates towards the year end or early next year,” Lawrence Yun, chief economist for the National Association of Realtors, said in a statement. The Fed’s pattern of 10 consecutive rate hikes has chilled the investment sales market, Commercial Observer reported. 

“There is still some chance that they might actually raise rates,” Piskorski said. “But if you put the gun to my head, I would say it’s more likely that they will pause rather than raise rates.” 

The Fed has raised interest rates in an attempt to cool inflation, a trend that appears to be working given the latest report, The New York Times reported. 

Still, consumer prices for many goods remained elevated in May, with food costs 6.7 percent higher in May than a year before and new vehicles priced 4.7 percent higher year-over-year. Used truck and car prices rose 4.4 percent from April to May, though the cost of a pre-owned vehicle shrunk 4.2 percent annually in May. 

Celia Young can be reached at