Housing prices drive CPI with another record

Housing price hikes along the Wasatch Front didn’t take the holidays off like they usually do. For the second consecutive month, home prices in December set a year-over-year record for growth, according to the Zions Bank Wasatch Front Consumer Price Index (CPI). The 0.4 percent rise was unusual because housing prices typically dip in December. From December 2017 to December 2018, Utah housing prices increased by 9.4 percent — the biggest jump since the Zions Bank started tracking the such things in 2010.{mprestriction ids="1,3"}

The CPI increased 0.3 percent from November to December on a non-seasonally adjusted basis. Year-over-year, the index has grown 5.4 percent, which is tied for the largest year-over-year price increase in the index’s history. Nationally, the Consumer Price Index has increased 1.9 percent since December 2017.

Housing prices are the leading factor for overall price growth since November 2018 and since December 2017. Food away-from-home and utilities prices are the next-largest factors in the overall price increase from November. Transportation and medical care price growth are secondary drivers of the year-over-year price changes, Zion Bank said.

In terms of job growth, construction has been one of the fastest-growing industries for years, according to the Utah Department of Workforce Services. Even so, Utah’s population growth has been so rapid that supply has still fallen below demand.

“The rapid price growth we’re seeing in housing will stay strong until the supply of newly built houses overtakes both pent-up and near-term demand,” said Scott Anderson, Zions Bank president and CEO. “Thankfully, our strong job market is encouraging the construction industry to keep investing in residential housing units here in Utah.”

The Kem C. Gardner Policy Institute’s database on construction in Utah shows that permits for 20,686 residential units were released from January to October 2018, an increase of 4.4 percent from the year before.

“With the one-to-two-year lead time that it takes to complete housing units, I anticipate that housing supply will catch up to demand within 12-18 months,” said Randy Shumway, chairman and partner of Cicero Group, a Salt Lake City research firm that does data collection and analysis for the CPI. “That means we’ll continue to see residential unit values be strong and even increase in the near term, but that construction will finally be at pace with Utah’s population growth in about year.”{/mprestriction}