When AJ Frank graduated from high school in 2009, he witnessed the collapse of the Phoenix real estate market and its entire economy. He is once again experiencing major financial turmoil as the cost of living rises sharply.
Phoenix — among others hardest hit city During the housing crisis, the US is now on the cusp of another painful economic trend as it faces its fastest inflation in 40 years. The city has experienced some of the fastest price increases in the country, something Frank felt firsthand.
His landlord tried to raise his rent by nearly 30% this year, causing him to move out. Mr. Frank, a 31-year-old engineer, is paying $250 more each month than he used to, and rising food and gas prices are reducing his disposable income.
“It’s always been a nice city to live in, but it’s getting more and more expensive,” Frank said of Phoenix.
Inflation is rising rapidly across the country, but is especially high in Sunbelt cities such as Phoenix, Atlanta, Miami and Tampa. national rate of 8.5% in July.Prices rise in the American South 9.4 percent That’s the fastest pace of any large region in the country over the past year, and faster than the Northeast, where prices are up 7.3%.
Part of the disparity can be traced back to fuel and electricity costs. sharply increased Earlier this year. Many Sun Belt cities rely on cars and air conditioning, so these purchases make up a large portion of consumer budgets in the region. And just like in 2008, housing plays a key role. This time, through the rental market, which is a major driver of overall inflation. in Phoenix, Rents up 21% from a year ago and in miami, they have increased by about 14%. For urban dwellers nationwide, rents have only risen by about half, at 6.3%.
Strong inflation in the Sunbelt is significant for several reasons. Inflation hurts everywhere, but in cities like Tampa Bay, where prices are rising faster than in areas like New York City, it’s disproportionately impacting families. Demand for food banks and eviction counselors is surging across the region as signs of that distress appear, providers say.
And as in 2008, the Sun Belt could act as a kind of trailblazer. Inflation is showing signs of easing across the country, with inflation slowing to 8.5% in the year to July from 9.1% last month. Yet the same factors that are currently driving prices skyrocketing across the South could keep inflation higher for a longer period of time.
That’s because a milder version of the rent spike that’s driving up inflation across cities in the American South is starting to unfold in the big cities of the Northeast and West Coast. Real-time market rent tracker It is now the shows a greater increase in places like New York, San Jose and Seattle.
Inflation FAQ
Inflation FAQ
What is inflation? Inflation is the loss of purchasing power over time. So your dollar won’t go as well tomorrow as it did today. This is usually expressed as annual fluctuations in the prices of commodities and services such as food, furniture, clothing, transportation, and toys.
Due to the way the government calculates the data, it will take time for these market rent increases to be reflected in the official inflation rate.The current surge in the official Phoenix inflation rate is due in part to Increase in market rent In 2021, early increases in large coastal cities may continue to put pressure on inflation in the coming months. The impact may also be evident at the national level. New York and its suburbs account for about 11% of the nation’s rental housing-related costs, according to the Consumer Price Index, compared to about 1% for Phoenix.
Omair Sharif, founder of Inflation Insights, said:
Federal Reserve officials pointed out that risk at their July meeting. Minutes released Wednesdaysaid that “in some product categories, the rate of price appreciation could rise further in the near term, and it is particularly likely that the cost of renting homes will increase significantly.”
The Federal Reserve (Fed), which has been raising interest rates since March to contain consumer and business demand and keep inflation under control, is expected to do so again at its September meeting.
So far, much of the regional disparity in price increases, from rents to consumer goods and services, traces back to migration. For years, people have flocked from large coastal cities to lower-cost cities, a trend that has accelerated sharply with the onset of the pandemic. This pattern is playing out in both the Mountain West, where inflation is on the rise. remarkably highand the sun belt.
For example, Florida and Arizona experienced some of the biggest In 2021, the population will grow, with internal migration adding about 221,000 and 93,000 residents.Phoenix and Tampa Especially adding new entrants rapid. “People basically flooded into these Sunbelt metros, creating additional demand in the housing market that supply couldn’t keep up with,” said Redfin economist Taylor Ma. , correlates well with these migration patterns.”
It’s not just a shelter, he said. As people leave San Francisco and New York for historically more affordable areas, often bringing their big-city paychecks with them into the new era of remote work, it pushes up the price of a wide variety of products. Car prices, childcare costs, and even food costs are likely to meet the surge in demand.
In Phoenix, Van Welborn witnessed the aftermath of a wave of immigration. Welborn, who has 21 years of experience in local real estate and is a Redfin agent, said he feels the situation today is very different from his 2008 situation.
“The housing boom at the time was about people buying homes who weren’t supposed to have them,” Wellborn said. “People are now coming to Phoenix from expensive areas, driving prices up.”
As people from coastal areas come to the area to buy second homes or rent apartments, the supply of available housing decreases. This drives prices up for locals like Mr. Frank.
Understanding Inflation and How It Affects You
“The rent was quite a shock to me,” Frank said. He can live with a salary increase of about $80,000, but said it “stings” a bit.
Others are not so lucky. In Tampa, Thomas Mantz, president of Food Pantry Feeding Tampa Bay, sees demand for food assistance rise 35-40% in the past six months.
“We all need to worry when those who are employed, responsible and productive parts of their communities are unable to sustain their livelihoods,” Mantz said.
Virginia Garcia and Danielle Garcia, who care for three young children, are among those seeking help. Before the pandemic, Ms. Garcia stayed home and cared for her children, while her husband put her to work 40 hours a week to finish the drywall. But his working hours were cut during the pandemic, and his family began turning to food banks to supplement their groceries.
Just as jobs returned, gas and food prices began to skyrocket. And a few months ago, Mr. Garcia, a diabetic, developed gangrene in his leg and had to have his leg amputated, losing his job. Garcia applied for a job in the school cafeteria, but so far he’s been using his credit card for back-to-school clothes and other expenses, counting everything.
Food prices “jumped day by day,” Garcia said. “Bananas, tomatoes and meat are very expensive, so we cut back on meat and protein.”
Garcia once refused to eat as a child and vowed that neither would her own children.
Signals are echoing across the Sunbelt that higher prices are causing serious distress to families. In Miami, legal aid providers are witnessing a surge in eviction cases as the moratorium ends and rents soar. People with housing assistance vouchers are having trouble finding apartments in the price range set by the government, according to Sean Rowley of Legal Services Miami.
“I’ve seen low-income families lose their vouchers because they can’t rent an apartment,” he said, explaining that benefits expire if someone doesn’t find a home in the allotted time.
The key question is what comes next.Fuel costs have eased in recent months, which has already helped keep inflation in the Sun Belt and across the country in check. Is there: Phoenix Leases are 35% higher For example, it’s up since the start of the pandemic, but it’s only increased by 2% over the past six months.
Adam Cummins, director of Moody’s Analytics, which focuses on regional and local forecasts, expects inflation to begin to level across the country as price gains in the South weaken more quickly. He said he was.
“I think there will be some convergence of inflation in the region,” Cummins said. “We haven’t seen it yet.”