As largely expected, inflation has surged this past month.
The Consumer Price Index (CPI) grew 0.9% from February to March, with annual inflation at 3.3%. This is a drastic increase from the 0.3% increase seen in February, when annual inflation was 2.4%.
Separately, another measure of inflation through the Personal Consumption Expenditures (PCE) price index specifically excluding volatile food and energy—aka core inflation—increased 0.2% in March, with annual core inflation coming in at 2.6%. This remained the same from February, where core inflation increased 0.2% month-over-month and annual core inflation was at 2.5%.
Bright MLS Chief Economist Lisa Sturtevant noted that the 0.9% month-over-month increase in CPI was the largest monthly gain in nearly four years, citing the primary driver for this month’s spike as the surge in energy prices resulting from the conflict in the Middle East.
She noted that this higher inflation has impacted the housing market in a couple of ways, as well as consumer sentiment.
“Mortgage rates, which fell briefly below 6% in February, rose for five weeks in a row before declining slightly this week. Higher rates erode buyers’ purchasing power and stall progress toward greater affordability,” Sturtevant said. “The University of Michigan’s Consumer Sentiment Index fell sharply in March as households, particularly middle- and high-income households, reacted to the volatility of energy costs and the stock market. This erosion of confidence is creating a ‘psychological freeze’ in the housing market that extends beyond mortgage rates.
“The spring housing market is currently caught in a crosscurrent of conflicting signals. Although inventory is rising seasonally, a tug-of-war has emerged between increased choice and decreased confidence. Both buyers and sellers are acting with extreme caution, waiting for lower rates, more stable inflation and more certainty.”
Realtor.com® Senior Economist Jake Krimmel said that these increases underscore the month-to-month whiplash consumers and financial markets have been experiencing since the start of the Iran War and the resulting geopolitical and supply chain shocks.
“Even though these numbers were expected, that doesn’t make them any easier for consumers to stomach,” he said. “Where today’s numbers do matter most, though, is in consumers’ pocketbooks. Unlike central bankers, everyday Americans do not have the luxury of ‘looking through’ higher gas prices. The more prices rise, especially on highly visible purchases like gasoline, the more households tighten their belts, which has real consequences for spending, confidence and big decisions like buying a home.”
