Housing Market Analysis: Unraveling Current Inflation Figures
In a recent statement, Lawrence Yun, chief economist for the National Association of Realtors (NAR), highlighted the importance of addressing shelter costs through increased housing supply as a key factor in taming overall inflation. This comes as the NAR median existing-home sale price in June reached an all-time record of $435,300, marking a 2 percent year-over-year increase.
The housing market plays a significant role in influencing inflation, primarily through its impact on mortgage rates, home prices, and construction costs. Persistent core inflation tends to keep mortgage rates elevated, which can cool housing demand and price growth, thereby dampening inflationary pressure from housing costs. However, supply constraints such as construction delays and tariffs have kept U.S. house prices resilient, supporting prices even when demand softens.
The unique features of the U.S. mortgage market have also contributed to the relative resilience of U.S. home prices despite Federal Reserve rate hikes, compared to sharper price declines abroad. This resilience affects the shelter component of the consumer price index, a significant factor in overall inflation.
In terms of housing affordability, the income required to afford a median-priced home has risen drastically, resulting in significant affordability challenges. High property taxes, insurance costs, and mortgage rates mean owning a home frequently costs more than renting in many cities. Economic pressures including high borrowing costs and job uncertainties discourage people from moving or buying homes, particularly impacting first-time buyers and young professionals. This leads to record-low rates of residential moves and reduced job mobility, which may have broader economic implications.
Housing price growth has slowed in 2025, with some metro areas even seeing listing price declines, particularly where inventory is more available. However, the supply shortage continues nationally, keeping prices relatively high and affordability strained. Single-family housing starts and permits have shown weakness recently, contributing to supply constraints. While multi-family housing permits have increased somewhat, single-family construction remains at low levels, further limiting affordable housing availability.
In conclusion, elevated mortgage rates and persistent inflation have tightened housing affordability for many Americans, constraining their ability to purchase homes and adversely affecting mobility and economic resilience. As we move forward, it's crucial to monitor these trends and consider factors such as locking in mortgage rates, putting down payment savings in high-yield accounts, and choosing mortgage lenders with low or no fees to navigate the current housing market effectively.
References:
- NAR Press Release: Existing-Home Sales Rise in June
- Cotality Home-Price Analysis: May 2025
- Federal Reserve Bank of San Francisco: Housing Market Dynamics and Monetary Policy Transmission
- Bankrate: Housing Continues to be a Contributor to Inflation
- U.S. Census Bureau: New Residential Construction
