Bloomberg reports that the drop in real estate values has not helped reduce housing costs. Due in part to more households entering the ranks of renters, the cost of shelter has actually risen in the U.S.. The Labor Department reports that year to date through July, shelter costs have risen 2.7 percent on an annualized basis. This is the highest rate of increase since January 2008, shortly after the recession began. Shelter in this case includes houses, apartments, hotels and college dorms. The report doesn’t mention manufactured housing, which may be included under houses. Rental vacancies are at the lowest level since 2002, pegged as being at 9.2% in June. Shelter consumes 32% of the Consumer Price Index (CPI), so this creates challenges for the Fed and government planners. Federal officials have been examining the idea of using homes in Fannie Mae and Freddie Mac’s inventory as rental units, a move that may ease the rise on shelter expenses and take some of the foreclosure inventory off the market.
(Shelter cost graphic credit: Labor Department & Bloomberg)