AP
- Inflation in parts of the US, like Tampa, Florida, is higher than 10%, while it is 6% in New York.
- The UCF’s Sean Snaith told Insider this was driven by house price growth and transport costs.
- Poor transport links and migration from higher-cost states could make price rises endemic, Snaith said.
Rampant inflation exceeding 10% in parts of the US can be linked to the housing bubble and poor transport connections — and could make price rises endemic, according to an economist in Florida.
Sean Snaith, director of the Institute for Economic Forecasting at the University of Central Florida (UCF), told Insider that the reason prices were rising much more quickly in the state than in major cities was fast house prices and a lack of viable transport options that put pressure on gas prices.
In the Tampa Bay metro area of Florida, consumer price inflation (CPI) for March was 10.2%, while in the New York metro area of New York State, prices only rose 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, given that 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 mainly been driven by migration from other states, which is the highest in the US. Inevitably, the growth of both the population and GDP is heaping pressure on prices.
‘A single-family home is not bitcoin — it shouldn’t be going up by 20% a year’
Snaith said that huge growth in housing costs, which make up more than 40% of the weighted CPI average, was driving disproportionate overall price increases in cities like Tampa.
In the final quarter of 2021, median house prices in Tampa rose by more than 26%, while they grew by 11% in the US. Snaith said growth in the former area wasn’t sustainable.
“A single-family home is not bitcoin. It shouldn’t be going up by 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 issue in Florida and other states was transport. Transportation costs were up 20.8% in Tampa in March, compared with 14.7% for New York, where a strongly developed subway network kept costs from rising as oil and gas prices spiked.
“If you’ve got to get your kids to school, go to work, you’re pretty much hopping in a car and driving,” Snaith said.
According to Snaith, this put further pressure on house prices, as limited commuting options clustered workers in a smaller area, exacerbated by investor purchases. Snaith added that the migration that helped Florida’s GDP grow faster than the US also changed buyer behavior from the usual market.
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 they see a house that costs $400,000, that looks like a bargain to them.”
Snaith said the Federal Reserve needed to accelerate its plan for interest rate rises, warning stimulus applied during the pandemic had contributed to a huge supply chain crunch. At its last Fed Open Monetary Committee meeting, the Fed targeted a Federal Funds Rate of 2.8% by 2023, up from about 0.33% currently.
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