Housing costs barely let up in April and remain sticky, data from the Bureau of Labor Statistics showed on Wednesday, with year-over-year shelter inflation continuing to outpace growth in other consumer prices.
The shelter component of the April Consumer Price Index (CPI) — which makes up a third of the overall inflation index — rose 0.4% month over month after rising 0.6% in March. On a yearly basis, shelter climbed 8.1% in April, down from 8.2% in March.
Headline inflation rose 0.4% over last month and 4.9% over the prior year in April.
The shelter index accounted for more than 60% of the monthly increase in the index for all items excluding food and energy — considered core CPI — according to the Bureau of Labor Statistics report.
"Shelter costs continue to be the largest contributor to inflation, illustrating the acute pain felt by renters in this country," Jeffrey Roach, chief economist for LPL Financial, said in an email.
The indexes for rent and owners’ equivalent rent — what homeowners would pay to rent their home — gained 0.6% and 0.5% over the last month, respectively. Both registered a 0.5% monthly gain in March.
While National Association of Realtors Chief Economist Lawrence Yun noted that rents are "still accelerating" even as inflation has "calmed down," he doesn't expect this trend to continue.
With apartment construction reaching a 40- to 50-year high, Yun forecasts that rent growth will decline as these units come online.
“We are already moving in the right direction towards consumer price inflation,” Yun said in a statement Wednesday.
Rent growth already appears to be cooling year over year for multifamily units. Fresh data from Apartments.com shows that rental prices increased 2.1% year over year in April, down from a 2.6% annual gain in March. Month over month, asking rent prices increased from $1,650 to $1,656, or by 0.4%.
In the single-family rental market, though, rents aren’t slowing down yet.
Invitation Homes Inc. (INVH) said in their earnings call that new lease rents grew 5.7% and renewals increased 7.8% in the first quarter. Preliminary April results show even more acceleration in rental growth with new leases growing 7.5% and renewals up 7.2%.
“New lease rent growth has accelerated sequentially every month so far this year,” Dallas Tanner, CEO of Invitation Homes, said on the call with analysts. “We're encouraged by the execution of our teams and remain bullish on our industry and our business as long-term fundamentals continue to be favorable.”
Home prices also offer a mixed picture. While not directly used in CPI calculations, home price growth is strongly correlated with housing inflation, according to the Federal Reserve Bank of Dallas.
One measure this month found home prices rose 0.45% in March from February, marking the strongest single-month increase since last May. Another indicator from the National Association of Realtors this week found that the national median price declined 0.2% year over year in the first quarter.
“Due to the intense housing inventory shortage, multiple offers are returning, especially on affordable homes,” NAR's Yun said in a press release. “Price declines could be short-lived.”
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Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv
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