Story at a glance
- Florida is home to the tri-city area with the highest inflation in the country, a recent WalletHub analysis found.
- That high inflation rate is due mainly to a surge of newcomers pushing up demand for real estate.
- But the state’s housing supply can’t meet the rising demand, driving up prices.
Florida’s cities are suffering from some of the highest inflation rates in the country as waves of new residents and tourists flock to the state.
Last month, the national inflation rate fell to 3 percent, its lowest level in nearly two years, according to recently released Department of Labor data.
But as the national rate drops, some parts of the country are faring better than others. Florida has struggled with particularly high inflation: The price of goods in the Tampa-St. Petersburg-Clearwater area was 7.3 percent higher in May than it was in the 12 months prior, the highest anywhere in the country, according to Consumer Price Index data. In the Miami-Fort Lauderdale-West Palm Beach area, prices rose by a similarly steep 6.9 percent.
That high inflation stems from the significant population growth in the state over the last two years, which has driven up demand for goods.
“Any time you have a population that is growing that is going to push up demand for everything whether its goods, services, food, clothing, vacations, housing, etc.,” said Amanda Phalin, an instructional associate professor at the University of Florida’s Warrington College of Business Management Department.
Florida is one of the three fastest-growing states in the nation. Close to 444,500 people moved to the Sunshine State between 2021 and 2022, according to the Tampa Bay Economic Development Council.
A surge in tourism in Florida is bumping up demand as well, according to Gustavo S. Cortes, an associate professor of finance at the University of Florida.
“The robust recovery of U.S. travel post-pandemic has led to a significant influx of both domestic and international tourists, exceeding even pre-pandemic levels,” Cortes, said in an email to The Hill.
“This increased tourist activity translates into heightened demand, thus exerting an upward pressure on prices in tourism-centric states like Florida,” he added.
Earlier this year, Florida Gov. Ron DeSantis (R) announced the state had received a record-setting number of visits in 2022 with 137.6 million visitors — 12.9 percent more than the state saw in 2021.
The influx of newcomers is clashing with a limited housing market that can’t meet the increased demand, driving up prices for both renters and buyers.
Housing costs make up nearly a third of the value of goods and services that the Bureau of Labor Statistics uses to track inflation in the Consumer Price Index, according to Randall Holcombe, an economics professor at Florida State University.
So, an increase in housing costs can greatly impact inflation.
Florida is home to one of the country’s hottest housing markets. Rent prices in Miami alone increased by a staggering 49.8 percent in 2021, according to a Realtor.com survey.
The housing market’s failure to keep up with demand is partly due to ongoing supply-chain issues stemming from the pandemic, which are slowing down the process of constructing new housing, according to Phalin.
The rising rates of homeowners’ insurance premiums — which are included in mortgage payments — in the state, due in part to the risk of rebuilding homes impacted by hurricanes, is also contributing to the increase in housing costs.
Florida is susceptible to hurricanes, and many of those storms are becoming more powerful due to warming waters caused by climate change.
Earlier this month, AAA said it would cancel some of its policies in the state and Farmers Insurance announced it would no longer offer coverage in Florida, joining the ranks of over a dozen other insurance companies that have left the Sunshine State.
The companies’ decisions will force at least 100,000 policy holders in Florida to look for new coverage.
And fewer homeowners’ insurance providers means that Floridians will most likely have to pay higher insurance rates, according to Phalin.
“It’s basic supply and demand … if the number of suppliers falls, the price will increase,” said Phalin.
On top of that, Florida’s state-run insurance company, Citizens Insurance, might force thousands of its customers to take more expensive policies from private companies.
But experts don’t think the state’s sky-high inflation stemming from high housing costs is here to stay.
The high price of housing will probably cause some Floridians to search for more affordable housing in other states, Phalin said, causing the prices to stabilize.
“I think that the pendulum is going to swing back,” said Phalin. “Eventually, the market is going to cool down and it will come to some sort of equilibrium.”
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