San Francisco Bay Area's Inflation Alleviates as Prices Decrease

The San Francisco Bay Area has been infamous for its soaring prices and unreasonable costs of living. However, in December 2023, the inflation rate was at its lowest rate all year. This trend is consistent in other parts of the nation as inflation levels have been decreasing. The labor market in the United States has been slowing down and high wages are increasing at a slower rate. To clarify, cooling inflation doesn't mean that prices are coming down. It simply means that prices are increasing at a slower rate than before.  

As a reminder, the consumer price index (CPI) is a measurement of the overall change in consumer prices and is based on a variety of everyday consumer products such as transportation and groceries. CPI is a good indicator to gauge inflation in an economy. A high CPI indicates that consumers must spend significantly more to purchase goods today than they did a certain number of years ago. This indicates inflation. A negative CPI indicates deflation since consumers would be spending less today than they were a certain number of years ago. 

This graph is taken directly from the U.S. Bureau of Labor Statistics. It illustrates the percent change of the CPI in the three years from the end of 2020 to the end of 2023. As depicted above, the percent change of the CPI of all items began declining in June of 2021. The Bay Area has seen a downward trend ever since. This indicates that the rate of inflation has been slowing down, even though it still exists. 

Let's look at what this means for the future. It is now evident that the growth of prices on all items has reduced. This means that the rate of housing inflation isn't as high as it was before. As a result, in the short term, this may give relief to some residents who are struggling to find real estate as they have more time to allocate funds toward purchasing a home. In the long term, the housing market will stabilize (assuming trends continue), and this will be favorable to low-income families in the region.