Inflation has cooled off but remains uncomfortably high. The job market is still hot. And housing prices keep climbing despite higher mortgage rates.
The South Florida economy is humming along as 2024 is half over. It is weathering higher interest rates as the Federal Reserve continues trying to squeeze inflation 鈥� for now 鈥� with higher interest rates. More people are interested in working. They are generally finding jobs. And wages are going up, now out-pacing inflation.
Inflation
Let's start with inflation because that will likely be an important issue during the election this fall. And with good reason. Inflation affects everyone, but it affects everyone a little differently. It's hardest for those struggling to make ends meet. Every price increase drains more money from already stretched paychecks.
At the beginning of the year, the annual inflation rate in South Florida was running just below 6%. That was twice the rate of the national inflation figure and it was the highest among major metropolitan areas across the country.
By April, regional prices had increased 4.5% compared to a year earlier. Still uncomfortable but much cooler and no longer the highest in the country. That title most recently belonged to the Dallas area.
So, we鈥檙e number two.
Housing remains the driver of our higher than average inflation rate. There are categories of spending that have a higher inflation rate than housing, but housing absorbs so much of our spending, it dominates contributors to inflation.
One of the items experiencing an inflation rate higher than housing is booze. Alcoholic beverage prices were up almost 9% in April versus last year. Clothing and recreation prices also outpaced housing inflation. But these are minor costs compared to paying for where we live.
So how much is housing contributing to regional inflation? If we ignore the so-called shelter costs, the South Florida inflation rate in April was just 2.2%. That is much more manageable for most residents. And it is very close to the Federal Reserve鈥檚 national inflation rate goal of 2%.
Housing
The housing market itself has proven to be resilient to the central bank's effort to bring down inflation by hiking interest rates. It has been nine months since the Fed's short term target interest rate hit 5.25-5.5%. There had been worry that as the Fed kept its interest rate up and mortgage rates remained higher, home prices may not hold up. But they have.
In January, 30-year mortgage rates were about 6.5%. They鈥檙e close to 7% now. Yet, prices for single-family homes that have been sold in South Florida are up almost 10% during the same time period. Condo prices are up about 7%. The proportion of homes and condos bought for cash remains about the same as it was at the beginning of the year, but it is higher here than the national average.
The Miami Association of Realtors recently released its . It expects a soft pace of sales to continue this year. The number of homes and condos for sale has increased pushing up the supply of homes and condos for sale. Still, inventory remains short of what is considered a normal balance. The realtors group predicted the number of sales will pick up next year and median prices will keep marching higher as it forecasted mortgage rates to drop a little. If that holds, it will help improve affordability just a little. It may also help keep prices up as buyers can afford to borrow more money.
READ MORE: A late year forecast: lower interest rates 鈥� if inflation keeps cooling
Jobs
As the year has gone on the regional unemployment rate has been creeping up 鈥� from 2.4% in January to 2.6% in May. There are more people in the regional labor force and, generally, they have been finding work. As more people are considered part of the workforce, it is not uncommon for the unemployment rate to move higher. The construction, education, health, and hospitality industries have all added positions this year.
South Florida began the year with the lowest unemployment rate of any large metropolitan area in the nation. It continues to have one of the lowest jobless rates through May.
Workers are seeing bigger paychecks. Wage have been growing year-over-year. At the end of last year, wages and salaries were up about 5% compared to the previous year. In March, wages and salaries were up 7% over the last 12 months. That made South Florida number one in the country among big metro areas for wage growth.
