The price of rent and OER both rose a modest 0.2 percent in November, but shelter jumped 0.3 percent. The reason is lodging away from home. 
Shelter Notes
- Rent of primary residence is measured rent.
- Owners’ Equivalent Rent (OER) is the rent a person would pay if they rented their own home in lieu of a mortgage or outright ownership.
Rent of primary residence plus OER of primary residence compromise 33.467 percent of the CPI. The combination is 91.43 percent of the shelter index group.
This is why I was a bit surprised earlier today to see shelter up 0.3 percent, with OER and Rent up 0.2 percent and insurance (another 0.4 percent of the CPI) flat for the month.
CPI Lodging Away From Home Index
Based on limited data that only dates to 1997, the price of lodging away from home tends to take a hit during recessions, then recovers.
The Covid recovery was very rapid, then stalled. The question is where to from here.
CPI Lodging Away From Home Month-Over-Month
Month-over-month fluctuations appear to be random noise, yet those fluctuations create the trends in the chart above.
The index peak was in March of 2023. We have not yet broken the downtrend since then.
If the lodging away from home move in November is random noise, then shelter will start getting closer to numbers that the Fed would like to see.
The CPI Rises 0.3 Percent in November
For more details on the CPI, please see The CPI Rises 0.3 Percent in November, Rate Cut Odds Jump Anyway
Big Picture:
AT THE END OF TECHNOLOGICAL HUBRIS
There’s a fair chance that this might be the last article published here in 2024.
That being so, I’d like to start by thanking you for your interest and participation in our discussions during the year, and wishing you a very merry Festive Season and a happy and prosperous New Year.
Until quite recently, the idea that the global economy might reverse – my preferred term is inflect – from growth into contraction lived in the realm of radical and unwelcome theory.
But this has been the year in which theory has been borne out by experience.
Much as astronomers deduce the existence of invisible objects through their gravitational effects on other bodies, we can see the effects of economic inflexion in everything from social discontent and the “cost of living crisis” to deteriorating international relations and worsening financial fragility.
The causes of the ending and reversal of growth can be summed up in the single word depletion.
Fossil fuel energy has been depleted to a point where its material costs, measured here as the Energy Costs of Energy (ECoEs), are becoming unaffordable.
More https://surplusenergyeconomics.wordpress.com/2024/12/12/295-beans-on-tech/
Inflation will only worsen
I hear those AI data centers that are becoming such a hot commodity now, are energy hogs on top of it.
Here in Massachusetts many of the hotels, including the one in my city have been turned into housing for illegal migrants. It’s a guaranteed revenue stream and the remaining hotels can charge more to the public for the dwindled room supply.
Here in Minneapolis, they turned an older motel (that had long had a shady clientele) into a homeless shelter. 7 months later the homeless burned it down – along with a nearby townhouse structure. No good deed goes unpunished.
I so agree Rick, once the government is paying prices can and will go up, we see this in some contracting (collusion & limited bidding via limiting the contractor list). Still, we saw some over building in hotel/motel, they had to compete for pricing, eventually that wears off (again, often collusion). Could be some seasonality, we see that in Alaska for sure, and who wants to stay with the in-laws, pandemic stay away theory. In the Wisconsin’s Dells, some years ago they finally built up indoor water parks and it’s a big money maker in the winter even though the indoor parks are lame compared to the outdoor parks. Then you’ve got your jellystone and yogi bears, with plenty of camping, not everyone made of money.
Just got my renewal quote for auto insurance.
Was paying AUD1030.
New premium AUD1352
TFCW – Total F789ing Clown World
Fortunately we exited the property market last year – home insurance was ballooning towards AUD10,000 per year. Maintenance costs were exploding higher as well… council taxes were increasing at least 15% per year. Some sucker bought off of us at near the peak of the market…
What cannot continue. Will Stop.
And the global economy is going to shatter into a trillion pieces
Probably holiday travel for Thanksgiving.
I guess the market assumes it could be worse, and the fed will continue to flood the market with liquidity and lower interest rates.
The average American’s paycheck in Nov was a record high $1,221.42…
But it bought $176.86 less than the much smaller average paycheck in Jan ’21…
OMG the next 4 yrs are gonna be fun!!
Congressman Claims Drones Over New Jersey Were Launched by Iranian ‘Mothership’The Republican says it was launched a month ago off the east coast of the U.S. and should be shot down.
Maybe they’ve caught on to how sick of Airbnb people are getting.
I have one in PV very soon. 8 nights 500 bucks. Locals neighborhood. Love Airbnb. No tourist zone.
Colleges Warn Foreign Students to Get to Campus Before Trump Takes Office
Harvard, Penn and U.S.C. were among the universities and colleges that issued advisories in anticipation of possible travel bans.
Not unusual – there were travel bans during the pandemic, which foreign students had to get out in front of.
They can always bunk up with the $400,000 / year Deans Of Diversity.
“General Motors announced Tuesday afternoon, after blowing $10 billion on its misbegotten robotaxi-startup money-pit Cruise LLC”
Inflationary: robo-taxis in Chinese pilot projects undercut human taxi drivers by 50%.
Not to mention my hope not to use a human driven taxi ever again.
The problem with these robo pcs of shit is that the companies have to purchase fit out and maintain a very expensive fleet of vehicles. Insanely expensive…
Meanwhile companies like UBER do not have those costs….
You would have thought that investors might have realized this was a completely ridiculous business model that was guaranteed to fail.
And then there is the issue of accidents… all you need are a handful and nobody will get into one of these cars again – no wonder they covered this one up
Cruise, SF’s embattled self-driving car company, is finally folding after $10B in losses
General Motors, Cruise’s majority owner, announced Tuesday that it is cutting off funding for robotaxi research and folding Cruise’s technical teams into a GM division focused on the development of personal autonomous vehicles.
San Franciscans can say goodbye to a potential return of the driverless orange-and-white cars that delivered riders around the city for months in 2023 before being forced off the road by regulators. That October, Cruise’s business stalled after one of its vehicles dragged a pedestrian, and the company hid part of the crash from authorities. https://www.sfgate.com/tech/article/sf-robotaxi-company-cruise-folds-gm-cuts-funding-19972259.php
Woke/DEI American engineering at it’s finest IMHO. Tesla, China, Japan, Mobileye & other tech companies involved not giving up at all. Fact; females riders want driver less taxi more than anyone.
“The question is where to from here.”
i could apply that question
to just about anything.
quoting the band Faces:
“I wish that I knew what I know now, when I was younger.”
The insurance number you are referring to is for tenants & the contents ONLY portion of homeowner’s insurance. The cost of insuring the structure(which BTW is galloping higher) is buried in OER. The small(.408%) weighting would also coincide with this metric. Just an FYI.
I wonder if migrants getting hotel rooms is limiting supply.
It is in NYC
I think all the sanctuary cities are paying for their rooms. I’m close the Denver at this is the case.
Why are we always thinking we need to dismiss numbers we don’t like as random noise? Sure I guess it could be an outlier or noise but might it also be the inflation moving into the hotel industry in concert with services inflation and now years-long inflation numbers that are just percolating into places more sensitive to service, taxes, insurance and general demand unrelenting with a market that has been at alll time highs, thus fueling discretionary dollars, into places like travel? MPOv45 would concur that the travel sector should continue to see demand as more of us leeches hit the social security trough (his general mindset, not mine).
I mean isn’t this thinking the same thinking that gives the Fed constant cover to dismiss true inflation by explaining away outliers, softening by hedonic adjustments and substitutions and using words like “inflation expectations”?
Near as I can tell the Fed bangs their junk on the table all the time with assymmetric response, adjusting data or deeming it transitory when there is actual inflation and immediately lowering rates at the first whiff of a sniff of a possible downtick in the employment numbers/GDP.
Same conversation and same behavior discussed forever. The only thing Certain is the Fed Uncertainty principle holding. It’s like the conservation of matter (except in this case they shouldn’t matter because they shouldn’t exist).
Party on Garth
Don’t forget to reverse mortgage
“Why are we always thinking we need to dismiss numbers we don’t like as random noise? ”
Because the chart suggests it’s random noise.
BTW, last month was -1.9 percent. Were we supposed to believe that was a trend?
That was random noise too.
It’s all random noise, by definition, until there is a meaningful break in the overall trend.
Mish,
If you want to see government interference in the real estate and holiday rental market look no further than Hawaii.
The constant change in laws/rules/taxes piled on short term rentals of condo units on Oahu has decimated that segment of the holiday rental sphere and pushed up hotel room costs like crazy over the recent past.
And the proposal to add a vacant house tax was recently put off/defeated. Estimates were that it would have add up to $30,000 in additional real estate tax to a vacant property.
I cannot afford shelter away from home.
I have the solution. The BLS needs to factor in the cost of sleeping for free overnight on the streets of San Francisco.
My insurance and taxes are now more than my mortgage. Thanks Biden
Congress sets tax rates and insurance companies set insurance rates. If you dont put blame where it belongs you’ll never solve the problem.
Congress has nothing to do with property taxes. If inflation wasn’t terrible municipalities would be able to keep costs down. Biden
Depends on where you live. In Blue states, public unions force up the property taxes with their outrageous salary + benefit package. That’s entirely at the state level.
This kind of person never wants solutions… they want to complain.
Buzz. The solution is to end liberal policies. We are on our way. Peace
It’s called park bench away from home.
I’m sure they’ve already discussed it. They’ll do anything to suppress the CPI index.
Good call Mish!
Yes as there is a definite cost associated with it. It is paid by the Taxpayers, and as a result it takes away from money spent on much more productive things for society. In other words, it’s foolish.