An influx of people — pushing up housing costs — has made the Florida America’s inflation epicenter. Domestic migration boosted the Sunshine State’s population growth above all other states from July 2021 to July 2022. As a result, the Miami-Fort Lauderdale-West Palm Beach area’s 9% inflation rate tops all metros with more than 2.5 million people. The rate is also more than twice as high as the 4% national average. Tampa-St. Petersburg-Clearwater is third highest at 7.3%. Meanwhile other metros have made big strides in reining in inflation, including Minneapolis at 1.3% and urban Hawaii at 2%.
By Jessy Bains, Editor at LinkedIn News
The Miami-Fort Lauderdale-West Palm Beach area has the highest inflation rate of metro areas with more than 2.5 million residents, with a 9% inflation rate for the 12 months ended in April.
That’s more than double the national average of 4%, according to data from the Consumer Price Index. The Tampa-St. Petersburg-Clearwater metro had the third-highest inflation rate in the country, at 7.3% for the year ended in May.
Here are some notable inflation trends for the biggest metros in the US and the dynamics behind those shifts.
A vexing inflation problem in the Sunshine State
In Florida, the state’s growing population has been pushing up inflation — particularly via housing costs. It’s a trend that accelerated during the pandemic, when remote work gave some Americans the freedom to relocate, economists say.
“A lot of people are still coming to Florida because the economy is really strong, and many like the fact that we don’t have an income tax like in New York, for example,” said Amanda Phalin, an economist at the University of Florida. “And in places like Miami, we’re seeing a lot of real estate demand from non-Floridians or non-American investors — generally wealthy folks who want to have a nice home here.”
Florida’s population grew the most of any state from July 2021 to July 2022 because of domestic migration, according to the Census Bureau’s latest estimates. During that same period, Florida also had the fastest population growth by percentage, the first time it has notched that top spot since 1957.
Housing costs account for almost a third of the Labor Department’s Consumer Price Index, and population gains heavily influence that component. An influx of residents boosts demand in a local economy across the board — for transportation, services and housing. That has pushed up inflation rates.
Rising interest rates, limited housing stock in cities such as Miami, and more expensive property insurance have also pushed up housing costs, Phalin said.
“Both the rental and purchasing markets are seeing upward pressures on prices from all these factors,” Phalin said. She added that there’s a shortage of available rental units because “a lot of homes are converting themselves into Airbnbs and some homeowner associations prohibit people from renting out their homes.”
That has all resulted in a growing affordability issue for residents who have lived in cities such as Miami and Tampa Bay for decades or their entire lives.
Progress on inflation
Housing costs also loom large in the metro area with the lowest inflation rate: Minneapolis and St. Paul.
“Shelter costs grew faster in Minneapolis and peaked a little bit earlier,” said Tyler Schipper, associate professor of economics at the University of St. Thomas in Minneapolis. “They peaked about six months before they did on average of the rest of the country.”
Also likely playing a role is how the Bureau of Labor Statistics tabulates shelter costs within the CPI and the timing of when readings are collected for various regions.
Shelter carries a lot of weight in the CPI calculations. However, it comes at a significant lag because of how infrequently the data is collected (every six months versus monthly or two months for other CPI prices) and because of how infrequently rents change (many leases are for 12 months, and rents typically are raised when a tenant leaves).
“I think that’s leading to this divergence where inflation peaked at about the same time for [the Twin Cities and the nation], but it just has dropped off faster here than in the rest of the country,” he said.
Helping that along has been a surge of multifamily construction, putting more apartments on the market and bringing down rents in the process.
Last year, multifamily permits made up nearly half of the total housing permits issued in the Federal Reserve Bank of Minneapolis’ district, which spans the Upper Midwest into the Mountain West. The activity — which was the highest share on record for that district, the regional Fed noted — is particularly evident in southeastern Minnesota, where large apartment projects are flourishing throughout the Twin Cities.
Even though the Twin Cities’ inflation rate is currently the lowest among major cities, it might not feel that way to residents, Schipper said.
“Because the CPI is so weighted toward housing, our overall numbers still looked really good, but those food prices went higher and stayed higher relative to other metro areas,” he said. “You’re going to have a hard time convincing people that inflation is getting better if their grocery store prices are still going up.”
Minneapolis resident Latoya Rogers isn’t feeling much price relief when she’s out getting groceries or buying other home goods. Aside from grabbing an item or two if she’s near a Target or a Cub grocery store, most of her shopping is done at Costco or Sam’s Club, she said.
“I budget a lot because things are so expensive these days,” she said during a quick run to Target in south Minneapolis. “Buying in bulk will last you longer.”
Still high, but doing better
At one point, the Atlanta-Sandy Springs-Roswell metro was America’s inflation hotspot.
Inflation soared in Atlanta for the reason it did in other cities in the South: The population grew, driven by Americans fleeing expensive coastal cities.
However, inflation in this metro area has come down steadily in the past year as supply and demand in the region’s housing market has come into better balance as migration into the city has slowed.
Atlanta notched an inflation rate of 5.8% in the 12 months ended in April — about half of the 11.7% peak it saw in August 2022.
“If you look at the data, housing inventory in Atlanta has increased quite a bit from a year ago, so there’s a lot more supply in the market, while the number of sales has been declining,” said Kaiji Chen, an economics professor at Emory University in Atlanta.
A drop in transportation costs also helped slow Atlanta’s inflation rate, he said.
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