Detroit Tops List Of U.S. Cities With Worst Inflation, Study Reveals – The Runner-Up Is A Texas City, And No It's Not Austin

Americans this year have been battling increasing gas prices, surging food costs and sky-high mortgages as a result of stubborn inflation. A recent study from WalletHub revealed that Detroiters are feeling the pinch more than others. 

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Inflation has been a worry on everybody's minds, including the Federal Reserve, which has been trying to get ahead of high inflation rates by increasing interest rates. According to WalletHub, inflation in the U.S. hit a 40-year high after the COVID-19 pandemic, and since then, it has stubbornly refused to leave. The current inflation rate is 3.3%. According to Forbes Advisor, inflation has moderated in many areas of the economy. However, in some places, like Detroit, residents are still battling high inflation levels with no end in sight.  

Despite the interest rate hikes, inflation is sticking around in Detroit's Warren-Dearborn metro area. David Skidmore, a professor at Drake University in Des Moines, Iowa, and one of the authors of the study, explained why the interest hikes have not worked as hoped in Detroit. The Detroit Metro Times reported Skidmore said, "The Fed's theory is that high interest rates will lower prices by dampening demand for goods and services as consumers reign in spending due to the high cost of credit." However, Skidmore added, "Instead of slowing spending, consumers have, over the past couple of years, drawn down savings accumulated during the pandemic and, most recently, gone into greater credit card debt." 

A large factor in why this metropolitan area in Detroit feels the pinch more than others is possibly due to the state's checkered history with debt. In 2013, Detroit filed for bankruptcy, and now, more than ten years later, the residents in the city are still feeling the effects. Despite seeing balanced budgets nowadays, retirees and city workers whose pension payments and healthcare were cut are battling to meet the sky-high inflation. AP News shared 52-year-old Detroit Fire Department lieutenant Mike Berent's story. Berent told AP News that despite nearing mandatory retirement age, he will need to continue working because his pension payments will now be more than $1,000 lower, and he needs to save more money for retirement.

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By using data gathered from the U.S. Bureau of Labor Statistics, the study compared 23 metropolitan areas by looking at Consumer Price Index Changes. The research found that out of all 23 Metropolitan Statistical Areas, Detroit-Warren-Dearborn has the biggest inflation problems with a score of 75. This metropolitan area in Michigan also has the highest consumer price index change of 2.80%. In second place was Dallas-Fort Worth-Arlington in Texas, with a score of 66.02.

According to Skidmore, some of the major factors that have influenced the rising inflation are housing and natural gas prices. In fact, Detroit's housing market is one of the fastest-growing in the country, and it saw the largest annual price gain of 8.9% in February. The national rate for the U.S. is 6.4%, which Detroit has now surpassed. A lack of housing supply with high demand in the metropolitan area of Detroit just adds to the stubborn inflation. During the worst of the state's bankruptcy, many abandoned homes and buildings were demolished.

Fort Worth, Texas, is facing a similar dilemma. Historically, Texas has been known for its low cost of living, but with inflation driving food prices up, lower- to middle-income households are feeling the pinch. With the added massive shortage of affordable rental homes in the state, Kera News reported that there could be a shortage of up to 679,000 rental homes. Unlike Detroit, Texas's problem sprouts from adding new jobs faster than housing. 

President Joe Biden released a statement shared by CNN Business, acknowledging that inflation levels were still too high after the March report. He said, "Today's report shows inflation has fallen more than 60% from its peak, but we have more to do to lower costs for hardworking families. Prices are still too high for housing and groceries."    

Is there light at the end of the tunnel for folks in Detroit and Texas? Bankrate’s chief financial analyst Greg McBride revealed, "You can kiss a June interest rate cut goodbye." Certified financial planner Amy Hubble told CNBC Select she does not expect an interest rate cut until September this year.   

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