Would be buyers can definitely curse the Fed over this housing debacle.
Percentage Increase Since January 2020
- Case-Shiller National Index: +50.9%
- Case-Shiller 10-City Index: +50.3%
- Consumer Price Index (CPI): +21.1%
- OER is the BLS measure Owners’ Equivalent Rent, the price one would pay to rent their own house in lieu of owning it. +27.5%
- Rent of Primary Residence: +25.6%
CPI Inflation Indexes Understated
The Fed and economists in general do not consider home prices as part of inflation. To the extent this is ridiculous (very), inflation as measured by the CPI is understated.
To counter my statement, the Fed and Economists will say housing is a capital expense, not a consumer expense.
So what? Does inflation matter or just consumer inflation? Common sense says the latter.
Year-Over-Year Chart
Year-Over-Year Percentages
- Case-Shiller National Index: +3.85%
- Case-Shiller 10-City Index: +4.92
- Consumer Price Index (CPI): +2.81%
- OER: +4.62%
- Rent of Primary Residence: +4.05%
Case-Shiller 10-City Metro
10-City Chart Notes
- San Francisco peaked at 816.9 in May of 2022. It’s now 764.2 down 6.5 percent. However prices are up 3 straight months.
- Denver peaked 647.3 in May of 2022. It’s now 634.5 down 2.0 percent. However prices are up 6 straight months.
Every other city is at or near record highs. The national and 10-city indexes also hit record prices in October.
Don’t worry. We don’t call this inflation. We pretend it’s not there or that it doesn’t matter if someone sees it.
Back in the Real World
Back in the real world, Credit Card Defaults Surge to the Highest Level Since the Great Recession
Credit card defaults are up a mere 50 percent from a year ago.
As defaults soar, please note Continued Unemployment Claims Make a New High for the Year
From August of 2023 until April of 2024, it was easy to find a job if you lost one. That has not been the case starting May of 2024.
Recession Indicator
I created a recession indicator using a moving averages of 15-weeks or longer unemployed.
For discussion, please see Two Recession Indicators, What Do They Say Now?
However, as with home prices, nearly everyone is convinced those indicators don’t matter either.
And who cares if the bottom third is going to hell as long as the top 10 percent keep spending enough to make it appear the economy is humming.
I attribute this amazing “on average” success to the dynamic duo of Bidenomics and Fednomics.
Geez folks,
Get with the program.
Houses in Perth, Australia went up 19% in 2024.
Other smaller places in Oz went up 50% in one year as well, but then there was Melbourne…..
Thanks to the left wing idiot numbskull Labor government here spending like they have unlimited funds the housing market fell in price.
Why?
Two reasons.
One is that they increased land taxes on properties other than your own house by a huge amount. This resulted in people putting their properties on the market and pushing prices down. Many people and businesses saw these taxes increase by 2 or 3 times as much as in previous years.
The second was a change in the rules and renter rights. The government implemented all sorts of laws regarding upgrading rental units when put on the market such as heating, cooling, and use of energy. They also increased renter rights at the expense of the landlord making it more difficult and costly to manage the property. People became fed up with all the crap and put the property on the market.
There were other reasons as well including increases in other taxes and fees.
People are putting their money into RE in places like Western Australia and Queensland.
Blackrock owns the House across the street. They own several (more than 10) houses in my neighborhood,all purchased since 2010.
The house across the street has been vacant sine june 2024. Its kept up, Blackrock owns their own maintenance and management companies. I just wonder why they are leaving it unrented for so long. The trees were trimmed last summer, garbage pickup continues, though the cans are empty.
is it just no one knows whats going on? or is it removing inventory from the market to drive up rental prices and home prices?
Most homeowners have lots of equity. Even better, their monthly payment is much lower than renting. Who would sell a house, pay transaction costs, then rent a house for a larger payment? This keeps sales volume and inventory low. In coastal Orange County, prices are still rising.
People who decided not to purchase a home when rates were low made a huge financial mistake. Renters keep pointing to the low sales volume as a precursor to a price crash. Nonsense. Over the years, we have seen big stock market and and bond market rallies on very low volume.
I am in OC and am selling my house and renting a new one, still in OC. Yeah I have a 2% something loan with like 90% equity, but I HATE North OC, am finally selling, and found a nice place in South OC close to the beach. Net-net I will be equal in cash flow, mostly because the owned north OC house is a maintenance nightmare. The new house is a little smaller, but in a much nicer area. And I will put my big equity into 4% Tbills and cover my new rent, so basically living rent-free (and no property taxes, etc.).
So making big, broad statements doesn’t cover every situation. I am giving up my low mortgage and renting, and the numbers work out fine, even in the OC.
Even if that works in the short run, that will never work in the long run. In 10 years, house and rent prices will double again, and you will have a big problem. Your problem will start in 5 years.
How useful is the Case-Shiller index really? Does it reflect the decreased volume of sales? What about who is buying these homes in such a high interest rate environment and the size of the homes? Is it only based on sales?
Case Shiller has its flaws for sure. By only matching repeat sales of the same house they are only capturing a fraction of the market. They claim they adjust for flippers spending on renovations (a major part of repeat sales), but from what I can see the adjustments are questionable at best. CS also only measures single family homes. This works okay in the suburbs, but for the urban cores or dense coastline areas, to not be monitoring condos is also a problem.
Question Mish; If this cost was added into the consumer inflation mix, approximately what would our consumer inflation rate be now?
I’m just not seeing this in Los Angeles and (large parts) of Orange County. Even with dismally low new inventory, prices do appear to be softening. The inventory is so low in some cities that it feels mathematically impossible and suggests some kind of shenanigans going on in the background, probably government caused. It’s worse than just the rate “lock-in” effect can explain, and I have 5 decades in LA to use as reference. In March/April we’ll know the softness is just seasonality at work, but I don’t think so. I think every willing and able, price-insensitive buyer (greater fool) has been found and has bought.
Yep, I’m seeing the same thing in LA. Prices are definitely softening, especially for condos on the Westside.
Nope. Southern California pricing is not dropping. According to Zillow, both LA and OC are at record highs.
Yep, in many metro areas it is now way cheaper to rent than own.
“The Fed and economists in general do not consider home prices as part of inflation.”
Is that a Bernays marketing narrative by FED and indocrtrinated economists, to manage public perception?
Contrary to the idiots: there is no “Penalty on Thrift”. The egregious policies are driven by the ABA. See Barron’s:
1) “Forgotten Man? Washington Again Is Threatening to Penalize the Thrifty” Jun. 6, 1966
2) “Up the Down Staircase, The New Economics Doesn’t Know Whether It’s Coming or Going” Sept. 26, 1966
3) “Ceiling Zero. The U.S. Must Take the Lid Off Money Rates” Nov. 26, 1967
4) “Men and Money, Savers of Modest Means Deserve a Decent Return” Jan. 19, 1970
5) “Q Marks the Spot. All Ceilings on Interest Rates Should Be Lifted” Dec. 28, 1970
6) “Maximum Mischief, Ceilings on Interest Rates Must Go” Mar. 13, 1973
7) “Supreme Interest. The Banking Agencies Have Finally Done Something Right” Jul. 23, 1973
8) “No More Wild Cards, Congress Has Dealt Savers Out of the Money Game” Oct. 2, 1973
9) “Poor Joe DiMaggio. It No Longer Pays to Save at the Bowery”” Sept. 22, 1975
The NBFIs are the DFI’s customers. The source of TDs is DDs. An increase in TDs depletes DDs dollar for dollar (assuming no change in bank credit).
Bernanke, pg. 287 in his book “The Courage to Act”, “Lower long-term rates also tend to raise asset prices, including house and stock prices, which, by making people feel wealthier, tends to stimulate consumer spending” (aka the “wealth effect”).
What a genius. Creating more credit tends to drive people to spend more. Also, giving people money tends to stimulate spending. Also, water is wet and the sky is blue. The guy truly deserved his position and got to leadership through merit.
If Albert Einstein had the American Bankers Association literally paying not to review of his epochal papers, they would never have been validated either.
It must suck being a Musk HBI visa person, whether a Hispanic from Mexico or a Latina from Portugal, working for cheaper wages while replacing the more expensive 15000 Musk laid off, and then having to pay more for rents or tripling up at the cheaper trailer park with different 8 hour shifts, day, swing, and graveyard, for sharing bed time. .
Homelessness in the United States soared to the highest level on record, according to government data released Friday.
More than 770,000 people experienced homelessness in 2024, an 18% increase from 2023, the US Department of Housing and Urban Development reported. It was the largest annual increase since HUD began collecting the data in 2007 (excluding the jump from 2021 to 2022, when the agency didn’t conduct a full count due to the Covid-19 pandemic)
I’m seeing stupid posts abound talking about homelessness is 18% of the population because of the the way the government and media reported on this new statistic.
The 18% is the growth above the last number. 770k people is ONLY 0.2% of the population. It’s peanuts. Just as the number of people who died with Covid was peanuts.
These people are the failures for any variety of reasons, usually from not paying attention in school, forcing them to start adult life on their heels, which then leads to poor financial decisions.
Expending resources to help failures is an approach that is not generally successful long-term. Most will fail again and be right back where they were before.
CA has expended $26 BILLION on the homeless problem over the last 4 years of Gov. Newsom’s reign. Yet the problem is as bad as before, with little to no reduction in the problem. Further, no one can document what happened to the $26 BILLION!
Subsidize ‘something,’ you get more of it? Tax it, you get less.
Prices of anything go up because people have the money to pay the higher prices. When the minimum hourly rates of the lower tier workers are increased to help them achieve that mythical “living wage”, which is what has been occurring since 2020, the wages of all workers above them do not stay static. These workers also demand and get increases, which all in all, leave the lower tier workers in the same relative position they were prior to any “social welfare” increases.
But prices don’t match wage increases. What often happens is that prices increase MORE than local wage increases as sellers explore how much of the new money floating around they can successfully capture.
And so the lower tier workers actually wind-up LOSING economic opportunity and position with each attempt to help them catch up to those economically above them.
This is what economists should be examining.
They deliberately exclude home price inflation and rationalize this with deceptive rhetoric the lap dog media never questions. They also exclude the higher payments caused by rising interest rates. This smoke and mirrors is deliberate they are LYING. This is why no-one with a brain trusts anything those corrupt assholes say. They are protecting the largess of the govt deficit spending and trying to rationalize suppressing interest rates to prevent an economic debt death spiral. This crap is part of the fourth turning. We need to clean house get rid of the lot with imprisonment for treason and start over.
Starting over is the difficult part. Lots of “solid” assets would need to be written off/reprised. And while that is done, the prices of other asset would still be high, so gnash your teeth.
The idea of admitting that they system is both fiscally and monetarily bankrupt is foreign to them, but renewal can only start by self-admission. They would rather admit to treason.
U.S. credit applications for mortgages and auto loans have currently been rejected at the highest rate in ten years, per Bloomberg
I may have to put foot-in-mouth with my last post about rent v mortgages (rent inflation higher than mortgages), but how can you have a reasonable comparison between the two? I understand OER, but when rent changes every year, and most mortgages are 30 yr, how are these equivalent for comparison?
Is it “should I rent my new place or buy it”? I can understand that comparison, but in aggregate, most renters nationwide see large increases yearly whereas most home owners nationally have fixed mortgages and don’t refinance every year so they don’t see the inflation as much.
It doesn’t seem to be a fair comparison when you’re looking for national trends.
You are assuming prices of houses can’t go down. How did that work after 2006? Many weren’t even for 15 years.
All it takes is interest rates to go to 4% and stay there for things to go back to normal. Of course, you cant service all the debt at 4% … a nice little trap.
That’s bullshit. They cut rates like crazy from 2007 on and it didn’t even bottom for 5 years. Prices are absurd. Yes I own. I’m also a realist
Every cut was behind the price curve.
The 2-year rate-of-change in required reserves started their decline almost at the same time housing prices peaked. And total checkable deposits didn’t change for 4 years.
Inflationary depression
Yeah, the GINI coefficient will hit all-time highs. It’s set in stone. The FED’s Ph.Ds. don’t know a debit from a credit.
No country for non-owners.
This looks more like a top is forming. The firs slope was moderate. The steepest slope was during COVID. The slope after COVID is back to moderate, but stalling quickly. I put this bubble at the the 2006 in the last housing bubble.
And when the interest rates go back to zero and the resumption of taking America private continues since 2008-2022 (and everything is bought up with free money by connected rich people — stocks, bonds, businesses and houses all get bought up), those house prices and apartment rents will skyrocket further.
So you’re saying as a hand-to-mouth renter with maxed out income in current field (Administrative) there’s no chance on providing my family with a home? Entry level homes are at $250k in my area and in need of TLC. Sad…
Scott loves the status quo. He cares about no one but himself.
Moving toward a feudal society with 5000 lords and ladies owning 98% of everything is not “status quo.” Better take those college textbooks out of your closet and read them again.
That is the current status quo. Yes and I don’t here you complaining about it.
soon they’ll be burning them to stay warm.
In time more houses will be built .. in time …
a nation with 5 time zones, full of arable land, and everyone wants to live in 2 time zones. The entire social structure is built upon a non-existent industrial empire, a shadow remains and the ghosts live within it.
an enterprising population, would move to the cheaper land, the cheaper home and build their own new towns and cities, and rebuild the fallen empire of the rust belt.
we possess a population of doom scrollers bereft of imagination,ambition and desire to do little but post their latest shopping trophy or fabulous meal on the internet.
The solutions are everywhere with no one sane enough to see them, yet alone accomplish them.
We’re in a bear market in bonds.