Florida Becomes Nation’s Inflation Hot Spot, Housing a Major Contributor

A sold sign in front of a new home being built in Miami, Fla., on April 16, 2021. The U.S. Census Bureau and the U.S. Department of Housing and Urban Development jointly announced that housing starts surged 19.4% in March to their highest level since 2006. (Joe Raedle/Getty Images)

Florida has become the nation’s inflation hot spot.

Data released on July 12 by the Bureau of Labor Statistics (BLS) showed that the Consumer Price Index (CPI) rose 0.2 percent in June, behind a 0.1 percent increase in May. Overall, there was an increase of 3.0 percent over the last 12 months before a seasonal adjustment.

However, inflation has recently slowed dramatically across the country, except for big cities in the Sunshine State.

The greatest increase is being seen in the Tampa/St. Petersburg area where the overall CPI is up 7.3 percent and housing is up 3.4 percent. Miami, Fort Lauderdale, and West Palm Beach have seen an overall CPI hike of 7.9 percent, while housing in these areas has risen 5.7 percent.

As explained by The Epoch Times in May, “Inflation is the devaluation of currency over time, meaning as goods and services become more expensive, the buying power of your money decreases.”

The BLS is responsible for reporting the CPI, which reflects the price change paid by consumers for goods and services over a period of time.

The Personal Consumption Expenditures (PCE) price index, developed by the Bureau of Economic Analysis, is another measure of inflation. While most people are not as familiar with the PCE as they are with the CPI, the core PCE price index—which excludes the food and energy categories included in CPI calculations—is important because it is used by the Federal Reserve to inform their monetary policy.

While 2022 CPI reports gave shelter a “relative importance” of roughly 34 percent, the PCE weighed shelter at around 16 percent.

But why is Florida faring so poorly compared to the rest of the country when it comes to inflation? The answer may be related to Florida’s ongoing population surge.

Home Prices

According to the BLS report, the index for shelter rose by nearly 7.8 percent, accounting for 70 percent of the overall CPI increase.

As previously reported by The Epoch Times in December of 2022, the U.S. Census Bureau labeled Florida as the fastest-growing state in the nation with a population increase of 1.9 percent. Between 2021 and 2022, Florida’s population surged by 1.9 percent to 22,244,823.

This migration phenomenon began during the COVID-19 pandemic when people began relocating to the Sunshine State to escape what they considered overly restrictive mandates being enforced for prolonged periods of time in other states. Since then, with the ever-increasing number of people relocating to Florida, the prices of available homes have continued to escalate. Metro areas like Sarasota, Naples, and Miami are now among the most unaffordable cities in the country.

According to Bank Rate, shelter costs are a major contributing factor when it comes to inflation measurements, and with the continued influx of new residents vying for a limited number of homes, it’s understandable that Florida’s housing market would also see a rise in prices.

Rent.com’s May 2023 Rent Report had median rents in Orlando at $2,153. In Tampa, the average rent runs around $2,255. Miami residents are slammed with an average rent payment of $3,066, well above the national median rent of $1,967.

Home buyers in the Sunshine State are also seeing an escalation in median home prices.

According to Florida Realtors, the average cost of a home in Florida in April was $410,000, which is notably higher than the nationwide median of $388,800. Assuming a 20 percent down payment and a 30-year fixed mortgage at 6.5 percent interest, monthly interest and principal payments on such a home would come to $2,073, and that doesn’t include property taxes or homeowners insurance premiums.

According to reports, homeowner’s insurance is also rising faster in the Sunshine State than in any other state in the country.

Insurance Costs and Mortgage Rates

In further pressures on Florida homeowners, The Epoch Times reported that, starting July 12, Farmers Insurance will no longer offer home or car insurance policies in the Sunshine State. The decision applies only to Farmers-branded policies and will affect less than 30 percent of policies in Florida.

In a statement, Farmers Insurance cited Florida’s seasonal hurricanes and tropical storms as the motivation behind its decision to pull out of the state.

“We have advised the Florida Office of Insurance Regulation (OIR) of our decision to discontinue offering Farmers®-branded auto, home, and umbrella policies in the state,” the statement advised, adding that “this business decision was necessary to effectively manage risk exposure.”

“Affected customers will receive notifications detailing when their coverage will end and will be advised of options for replacement coverage,” the statement said.

Exactly one year ago, Southern Fidelity canceled its policies in Florida.

Then, there’s the soaring cost of mortgage rates.

As reported on July 8 by The Epoch Times, U.S. home mortgage rates soared towards 7 percent, pushing the cost of home ownership even further from the reach of many. Data published by Mortgage News Daily showed that the average rate on a 30-year fixed mortgage hit 7.22 percent on July 6, the highest point since November of 2022.

With the surge in demand for housing and a chronic lack of inventory, real estate experts predict that housing prices will continue to rise.

On July 4, Norada Real Estate Investments reported that, while home values in Florida have risen by around 80 percent over the past five years, that trend is forecasted to continue for the next 5 years.

Jack Phillips contributed to this report.