Inflation in the Housing Market Signals Increased Consumer Demand

In April 2012, on a non-seasonally adjusted basis, the Zions Bank Wasatch Front Consumer Price Index (CPI) increased 0.7 percent from the month prior. The U.S. CPI, which is an aggregation of all prices throughout the nation, increased at a rate of 0.3 percent on a non-seasonally adjusted basis. Year-over-year, the Zions Bank CPI has increased 2.5 percent, which is in line with the U.S. CPI of 2.3 percent. Increases in the price of housing and transportation drove April's
inflation.       

Across the Wasatch Front and the nation, the housing market is showing signs of recovery. A 1.0 percent increase in the costs of housing accounted for half of the rise in April's CPI along the Wasatch Front. Locally, rental rates and hotel prices increased strongly, while the cost of consumer home goods, like appliances and bedding, increased at a more modest rate.

Nationally, a 0.1 percent increase in the price of housing, combined with a decrease in single-family housing inventory, indicate that the housing market recovery may be underway.

Over the course of the last twelve months, the price of housing has increased 3.7 percent across the Wasatch Front, compared to 1.7 percent nationally. Price increases in this sector are a sign that consumer demand is rebounding. In April, 71 percent of Utahans thought that the price of their home would increase or remain the same. Consumer confidence in home prices reflects an increasingly positive outlook for the local housing market and economy.

Transportation prices also increased for the third consecutive month, driven by a rise in airfare, gasoline, and public transit costs. Transportation costs along the Wasatch Front increased 1.7 percent in April, after a dramatic 5.2 percent increase in March. The recent surge in gasoline prices eased a bit in April, though pump prices still increased 3.9 percent.

According to AAA's Daily Fuel Gauge, the average price of regular gasoline in the state is $3.71, up $0.14 from last month's CPI report. While inflation at the pump was not as severe as last month, the price of airfare increased by 8.1 percent and the price of public transit increased by 4.6 percent.  

The price of education and communication increased 2.0 percent in April. Increases in the price of education at every level, from elementary to college, accounted for 100 percent of the inflation in this area.

Communication prices remained unchanged from month-to-month. Education and communication has experienced an annual inflation rate of 5.8 percent along the Wasatch Front, compared to 2.0 percent nationally.

A few categories decreased in price in April, most notably, utilities and medical care. The price of utilities fell by 1.9 percent due to a combination of decreased demand and increased supply of natural gas and propane. A decrease in the price of prescription drugs drove the price of medical care down 1.4 percent.

"We are seeing very positive signs from the housing market this spring," said Zions Bank President and CEO Scott Anderson. "When you consider where the market has been for the past few years, any increase in the price of housing is a great indication that the worst may be behind us. Obviously, the recovery still has its challenges, but the Wasatch Front is uniquely positioned to recover faster than the rest of the country. As Utah continues down the road to recovery, Zions Bank is dedicated to delivering the most accurate and relevant economic information to consumers and businesses."

Analysis and data collection for the Zions Bank CPI and the Utah Consumer Attitude Index, to be released May 29, are provided by the Cicero Group, a premier market research firm based in Salt Lake City.   

Additional information is available at www.zionsbank.com.
(5.16.12)