While the rate of inflation in most sectors of the economy has slowed over the last year, the cost of shelter in the U.S. remains high for many consumers.
Inflation data released by the Bureau of Labor Statistics in October 2024 revealed that while the Consumer Price Index overall was up 2.4% year-over-year, the index for shelter had risen 4.9% over the same span.
Increasing rent prices have been a major reason why. The dynamics of the rental market in recent years largely reflect simple supply and demand. In the years following the housing crash and Great Recession, the number of new housing construction projects plummeted and were slow to recover over the course of the 2010s.
Around the same time, the Millennial generation—America’s largest, with more than 72 million members—began to reach adulthood, introducing greater demand in the market. Economic conditions during the COVID-19 pandemic exacerbated issues with the rental market. As fast-rising real estate values priced more people out of homebuying, rental markets became more competitive among consumers.
On the supply side, inflation in the cost of materials, high interest rates, and tightness in the labor market have all contributed to difficulties in developing new housing stock. A historically tight rental market drove prices up at the fastest rate since the 1980s Source: Construction Coverage analysis of U.S.
Bureau of Labor Statistics data | Image Credit: Construction Coverage All of these issues have come to .