June 14, 2021
The latest CPI numbers have made a splash once again as prices make some of the fastest paces in growth since 2008. Home prices have contributed to that, as housing costs rose by 0.4% in May and up 2.2% from the previous year. However, for the average household, these numbers are completely out of whack. According to the Nobel prize-winning Robert Shiller, the Case-Shiller home price index is up over 13%. The CPI views the house as a capital investment and doesn’t think of them as consumable goods, and narrowly looks at implicit rental rates. Improvements or house costs themselves aren’t valued in the CPI. Don’t rely on the CPI as a gauge of the housing economy or the housing market. Real price inflation in housing has cascading effects on the economy.
(Miami)
FINSUM + Magnifi: Many homeowners or renters are cash-strapped and burdened by rental rates. Real inflation in this market could be a slowing sign for the aggregate economy as house price inflation consumes their budgets.
Other news today: The Bond Market Has a Big Correction Looming and This May Be the Biggest Muni Boom in History
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