- Inflation in parts of the US, like Tampa, Florida, is above 10%, while in New York it is 6%.
- UCF’s Sean Snaith told Insider this was driven by rising house prices and transportation costs.
- Poor transport links and migration from higher-cost states could make price increases endemic, Snaith said.
Rampant inflation exceeding 10% in parts of the US may be related to the housing bubble and poor transportation links, and could make price increases endemic, according to a Florida economist.
Sean Snaith, director of the Institute for Economic Forecasting at the University of Central Florida (UCF), told Insider that the reason prices were rising so much faster in the state than in major cities was rapid home prices and the lack of viable transportation options would put pressure on gas prices.
In the Tampa Bay metropolitan area of Florida, consumer price inflation (CPI) for March was 10.2%, while in the New York metropolitan area, in the state of New York, prices only increased by 6.1%. The national rate of inflation last month was 8.5%.
But Snaith said it was important to distinguish between inflation and the cost of living, since prices in areas of Florida were still much lower than in New York.
Florida has enjoyed strong levels of economic growth, growing faster than New York and the US last year. The growth has been driven primarily by out-of-state migration, which is the highest in the US. Inevitably, growth in both population and GDP is increasing pressure on prices.
‘A single-family house is not bitcoin, it should not go up 20% a year’
Snaith said huge growth in housing costs, which account for more than 40% of the weighted average CPI, was driving disproportionate overall price increases in cities like Tampa.
In the last quarter of 2021, median home prices in Tampa increased by more than 26%, while in the US they grew by 11%. Snaith said growth in the first area was not sustainable.
“A single-family home is not bitcoin. It shouldn’t go up 20% a year. I think that’s very unusual,” Snaith said. He indicated that as mortgage rates begin to rise, the rate of growth should slow significantly.
But Snaith said a more endemic problem in Florida and other states was transportation. Transportation costs rose 20.8% in Tampa in March, compared to 14.7% in New York, where a heavily developed subway network kept costs from rising as oil and gas prices rose. .
“If you have to take your kids to school, to work, you pretty much get in a car and drive,” Snaith said.
According to Snaith, this put more pressure on house prices as limited commuting options crowded workers into a smaller area, exacerbated by investor buying. Snaith added that the migration that helped Florida’s GDP grow faster than the US also changed the behavior of mainstream market buyers.
He said: “We get significant migration from California, New York, New Jersey, Illinois. These are all high cost of living places. If someone comes from California to Tampa and sees a house that’s $400,000, that seems like a bargain.” for them”.
Snaith said that
needed to speed up its interest rate hike plan, the warning stimulus put in place during the pandemic had contributed to a huge supply chain crisis. At its last Fed Open Monetary Committee meeting, the Fed targeted a 2.8% fed funds rate for 2023, up from 0.33% today.