The Coming Rise in Residential Inflation

We study how the recent run-up in housing and rental prices affects the outlook for inflation in the United States. Housing held down overall inflation in 2021. Despite record growth in private market-based measures of home prices and rents, government measured residential services inflation was onl...

Full description

Saved in:
Bibliographic Details
Published in:NBER Working Paper Series 2022-02
Main Authors: Bolhuis, Marijn A, Cramer, Judd N L, Summers, Lawrence H
Format: Article
Language:English
Subjects:
Economic theory
Inflation
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:We study how the recent run-up in housing and rental prices affects the outlook for inflation in the United States. Housing held down overall inflation in 2021. Despite record growth in private market-based measures of home prices and rents, government measured residential services inflation was only four percent for the twelve months ending in January 2022. After explaining the mechanical cause for this divergence, we estimate that, if past relationships hold, the residential inflation components of the CPI and PCE are likely to move close to seven percent during 2022. These findings imply that housing will make a significant contribution to overall inflation in 2022, ranging from one percentage point for headline PCE to 2.6 percentage points for core CPI. We expect residential inflation to remain elevated in 2023.
ISSN:0898-2937
DOI:10.3386/w29795