Where Has Inflation Hit the Hardest? Where Rents Have Increased the Most

Inflation has been exceptionally high in the 2020s. As of June 2024, average prices as measured by the Consumer Price Index (CPI) are up 22% for the decade, already surpassing inflation for the entire 2010s at 20% and well on pace to top the cumulative inflation of the 2000s and 1990s, a respective 29% and 32%.

However, the CPI measures inflation based on the average expenditure of all people in the United States. Of course, the ‘average’ person does not necessarily represent any person or individual consumer experience. People buy different goods and services of different qualities depending on who they are and where they live, so they will bear the burden of higher prices unevenly.

Perhaps the most substantial difference in people’s consumption is in the amount they spend on housing. This is widely different depending on where one lives. Housing costs receive a heavyweight in the CPI, making up almost one-third of the index, yet the average price of a home in San Francisco is double that of Washington, D.C., which is in turn double that of a home in Indianapolis and so on.

Figure 1 shows the CoreLogic Home Price Index, the CoreLogic Single-Family Rent Index, and CPI January 2020. Housing, whether measured by rent or home prices, has seen far more price appreciation than other goods and services in the CPI. Home price increases have doubled that of the overall CPI, and rents have increased around 50% more. So the overall inflation number has been getting dragged up by housing. Just how much will depend on where you live, and thus the impact of inflation will be more concentrated in places that have experienced the most intense home price increases.

Figure 2 shows the regional distribution of inflation in 20 metro areas. The overall inflation number is calculated through a method that uses CoreLogic’s Single-Family Rent Index to replace the typical measure of imputed rent for homeowners in the CPI[1]. The wide variation is clear, with inflation ranging from 30% in Miami to 18% in Minneapolis. Geographically, the heaviest inflation has been in the South, with Miami, Atlanta, Dallas, and Tampa, Florida all showing inflation above 25%. Houston is the only Southern metro below this threshold, having experienced inflation closer to the national average, at 21%.

Also shown in Figure 2 is inflation for all goods and services besides housing. There is slightly less variation in this number, ranging from 26% in Seattle to 18% in Boston. Inflation with housing included was higher in most places. Only in eight of the MSAs was housing inflation dragging down the overall number rather than pushing it up. These tended to be more expensive places that saw less appreciation and some population loss during the pandemic, such as San Francisco, Los Angeles, Seattle, 

These regional differences show just how differently inflation affects people, and how wide-ranging peoples’ experiences could be.  However, splitting inflation up by MSA divides just by geography, so it is only the tip of the iceberg in the different experiences that people have with inflation.

For instance, for homeowners who have a fixed-rate mortgage or own their home free and clear, the housing appreciation component of inflation is close to a non-factor, and their experience will be much closer to the numbers for all other goods. On the other hand,  for renters or first-time homebuyers, the overall number may not be reflective of buying habits that will more closely match rent and price indexes.