Housing affordability is still a major issue — even as inflation moderates, according to the White House.
“Housing is one of those areas where we really need to see some improvements on affordability,” Lael Brainard, National Economic Council director at the White House and former Federal Reserve vice chair, told Yahoo Finance Live on Tuesday.
“We are seeing some reduction in rents, particularly in new rents, so that is encouraging. But we still need to see a much greater supply of houses that are affordable to bring those rents down,” she added.
Brainard said the Biden administration is “pushing very hard” for tax credits and other incentives to make housing more affordable.
“But we also want to make sure that first time homebuyers really have a chance to buy their first home, so we’re very focused on down payment assistance and other ways to bring costs down for those first-time homebuyers,” she said.
‘Longer on the way down than the way up’
“Core” inflation, which strips out the more volatile costs of food and gas, remained sticky in November, climbing 4.0% over last year to match the annual increase seen in October, according to Bloomberg data. Monthly core prices climbed 0.3%, slightly higher than October’s 0.2% monthly rise.
This was the first time since March that the annual core inflation rate did not decline.
Within core, the shelter index rose 6.5% on an unadjusted annual basis, accounting for nearly 70% of the total increase in core inflation. On a monthly basis, the index increased 0.4%, a slight uptick from October’s 0.3% monthly jump.
Rent prices also remained elevated. The index for rent and owners’ equivalent rent each rose 0.5% on a monthly basis. Owners’ equivalent rent is the hypothetical rent a homeowner would pay for the same home.
“We continue to see signs that the lag between asking rents and CPI rent may be longer on the way down than the way up,” Stephen Juneau, US economist at Bank of America, wrote in reaction to Tuesday’s report. “Rents should eventually moderate towards pre-pandemic levels (~0.3% month-over-month). However, it remains a slow-moving process. This is one reason why we expect disinflation to slow next year.”
As Yahoo Finance’s Rick Newman pointed out, there are only four categories where prices are still rising faster than incomes — with rent serving as the top dog.
On a year-over-year basis, rent surged 6.9% in November while housing, which includes rent and other factors, climbed 5.2% annually. Personal care and food away from home, or restaurant meals, rounded out the four priciest categories relative to earnings last month, rising 5.2% and 5.3%, respectively.
Separately, home prices continue to hit record highs.
The S&P CoreLogic Case-Shiller National Home Price Index increased 0.7% in September from August on a seasonally adjusted basis — an all-time high for the index — and logged a 3.9% annual gain for the month.
Prices are largely anticipated to remain elevated with Goldman Sachs economists expecting home prices to appreciate 1.8% and 2.9%, respectively, over the next two years amid low supply.
Still, Brainard said she’s optimistic moving forward.
“Market rates are already coming down, mortgage rates have come down by nearly a full percentage point over the last few months so that is encouraging,” she said.
“In terms of house affordability and expansion of affordable housing, there’s bipartisan interest in that so I am hopeful there. We are taking funding that’s available for transit, we’re encouraging housing development near transit to solve both the affordability of housing challenge but also access to good jobs. I think there are a lot of things in the pipeline that will make a difference.”
Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, and email her at [email protected].
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