Florida Leads the Nation in Inflation Due to Sky-High Housing Costs
Washington (CNN) – Florida has emerged as the area with the highest inflation in the United States, primarily driven by exorbitant housing costs. The Miami-Fort Lauderdale-West Palm Beach area reported an inflation rate of 9% in the 12 months ending in April, more than double the national average of 4%, according to data from the Consumer Price Index (CPI). The Tampa-St. Petersburg-Clearwater metropolitan area also experienced the third-highest inflation rate in the country, at 7.3% in the year ending in May.
Meanwhile, other major metropolitan areas have witnessed some positive developments. Minneapolis recorded the lowest inflation rate among the 23 metropolitan areas for which inflation data is published, with a rate of 1.8% in May from a year earlier. Urban Hawaii ranked second-lowest with an inflation rate of 2%, aligning with the Federal Reserve’s target for its preferred inflation gauge, the personal consumption expenditures index.
In Florida, the alarming increase in population has intensified inflation, especially due to the rising cost of housing. This trend has accelerated during the pandemic, as remote work allowed Americans the freedom to relocate. “A lot of people keep coming to Florida because the economy is really strong, and a lot of people like the fact that we don’t have an income tax like in New York, for example,” explained Amanda Phalin, an economist at the University of Florida. “And in places like Miami, we see a lot of real estate demand from non-Floridians or non-US investors, generally wealthy people who want to have a nice home here.”
Florida experienced the highest population growth of any state between July 2021 and July 2022 due to internal migration, according to Census Bureau estimates. This influx of residents drives demand for transportation, services, and housing, significantly impacting inflation rates. Rising interest rates, housing shortages, and higher homeowners insurance have also contributed to the surge in home prices.
Conversely, the metro area with the lowest inflation rate, Minneapolis and St. Paul, is not immune to housing-related challenges. Tyler Schipper, an associate professor of economics at the University of St. Thomas in Minneapolis, noted that the cost of housing in the region grew faster and peaked earlier than the national average. He attributed this discrepancy to the Bureau of Labor Statistics’ calculation methods and when data is collected for different regions.
However, the construction of multi-family homes in Minneapolis has helped alleviate inflation. More apartments on the market and reduced rents have resulted from increased construction. Multi-family permits accounted for nearly half of all housing permits issued in the Federal Reserve Bank of Minneapolis district last year, particularly in the flourishing Minneapolis-Saint Paul metropolitan area.
While Atlanta was once the epicenter of inflation in the United States, the situation has improved as the supply and demand in the region’s real estate market have become more balanced. With a peak inflation rate of 11.7% reached in August 2022, Atlanta posted an inflation rate of 5.8% in the 12 months ending in April. The availability of homes in Atlanta has increased significantly, leading to a higher supply on the market, while the number of sales has decreased. Declining transportation costs have also played a role in slowing down Atlanta’s inflation rate.
Residents in these high-inflation areas, particularly long-term residents, are facing growing affordability challenges. Despite the lower inflation rate in Minneapolis, consumers still feel the pinch of rising food prices. Latoya Rogers, a Minneapolis resident, expressed her budgeting concerns and the need to shop in bulk to manage expenses.
While some metropolitan areas are showing signs of improvement, the escalating inflation rates in Florida highlight the urgent need to address housing costs and ensure a more balanced and affordable market for residents.