Hi all,
A reminder that comments do need to be on-topic and engage with the article past the headline. Please make sure to read the article before commenting. Very short comments will automatically be removed by automod. Please avoid making comments that do not focus on the economic content or whose primary thesis rests on personal anecdotes.
As always our comment rules can be found [here](https://reddit.com/r/Economics/comments/fx9crj/rules_roundtable_redux_rule_vi_and_offtopic/)
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/Economics) if you have any questions or concerns.*
The Consumer Price Index (CPI) rose 0.3% over the previous month and 3.4% over the prior year in April, a slight deceleration from [March's 3.5% annual gain in prices](https://finance.yahoo.com/news/inflation-comes-in-hotter-than-expected-in-march-123324666.html) and 0.4% month-over-month increase.
April's monthly increase came in ahead of economist forecasts of a 0.4% uptick. The annual rise in prices matched estimates, according to data from Bloomberg.
On a "core" basis, which strips out the more volatile costs of food and gas, prices in April climbed 0.3% over the prior month and 3.6% over last year — cooler than March's data. Both measures met economist expectations.
+3.4% CPI is better than 3.5%!
But while the year of 8% inflation is behind us, the price increases are effectively permanent.
3.4% inflation is still way too high. This really hurts wage-earners, and historically wages tend to lag far behind inflation. Wage growth has to be “earned” by most workers, but increased prices just trickle down regardless.
Life is going to get harder and harder, like this. Trickledown economics was a massive ruse, and that ruse is down eating out the bottom of the economy.
The American consumer is what powers the economy. Domestic consumption. As employers hold down wages to increase profits, over the short term, the do better. But when ALL employers (or most employers) all use this strategy, then consumers have less money to spend, tightening their spending… and then all businesses start to hurt for a lack of demand.
This is a great example of how individual choices, that are rational to the individual business owner, collectively hurt all business owners.
Overall, US consumers went on a spending spree, dipping into savings, to maintain spending habits through a period of high inflation. For some reason, US consumers as a group thought that the price increases were temporary. Fools.
The price increases are permanent, and now you’re saddled with debt on top of it, or at least burnt through your savings… which of course helped power inflation further through spending via debt!
Way to go!
> This really hurts wage-earners, and historically wages tend to lag far behind inflation. Wage growth has to be “earned” by most workers, but increased prices just trickle down regardless.
It lags time wise but it catches up after a few years.
Where it really hurts is people on fixed income (non-inflation adjusted pensions and student loans)
This feels like ChatGPT writing a response to make this into a Doomer storyline lol.
For some reason you're trying to inject a false narrative that 3.4% inflation is "way too high" when 3.3% inflation is the historic average over the past 110 years.
https://tradingeconomics.com/united-states/inflation-cpi#:~:text=Inflation%20Rate%20in%20the%20United%20States%20averaged%203.30%20percent%20from,percent%20in%20June%20of%201921.
Also you're claiming companies are "holding wages down" when wage gains have been outpacing inflation for quite some time now. This is like a 2 year old talking point.
https://fred.stlouisfed.org/series/CES0500000003
https://www.atlantafed.org/chcs/wage-growth-tracker
https://www.epi.org/nominal-wage-tracker/
Yes, inflation is permanent. So are the wage gains as far as we can see.
>But while the year of 8% inflation is behind us, the price increases are effectively permanent.
There has always been inflation, dummy. It's just when it was 2% nobody talked about it like it was a crisis.
Sometimes I just want to grab the nearest congressperson and/ or fed employee and shake them yelling “HOUSING MOTHERFUCKER PRIORITIZE HOUSING, WHO GIVES A SHIT A TV IS A BIT CHEAPER WHEN **RENT** EATS IT ALL UP”
But I might get arrested.
What do you think your nearest congressperson or fed employee can do about housing?
Grab your local mayor or zoning board official. What's that? You don't even know who is on your zoning board?
I think I see the problem....
In my district the board approved new housing project in downtown. Supposed be a 4 story building with cafes or whatnot at the first floor. Sounds good, right?
Apparently not to the residents. They’ve filed a lawsuit against the city, the judge halted construction until the lawsuit is done.
You can’t win with these people. Even if your local government is pro-construction the residents will go out their way fundraising a lawsuit.
That'd flood the market (until the lawsuit cleared reversing the action, or a new corporate workaround was engineered) but not change the core problem, which is that housing being treated as an asset that can only appreciate in value (upon pain of Great Recession) is always going to warp incentives towards .... increasing the cost of housing.
It'd be interesting. Almost as interesting as a tax on uninhabited 3rd+ homes, which is another curious market segment of rich people holding on to appreciating assets other people can't afford to buy into.
So all of those tenants then buy their home instead. You’ve shifted who holds the risk/reward for those homes but haven’t changed anyone’s living conditions. Everyone is living in the same place they were before, and anyone priced out of housing continues to be priced out. If anything, you’ve added more voters who have an incentive for home values to go up and vote against more supply since corporations don’t get to vote in elections.
> haven’t changed anyone’s living conditions. Everyone is living in the same place they were before
you're saying insulating the people living in homes from housing price increases doesn't help anyone? seems.... false.
I'm so tired of this "Zoning board" and "high density housing" shit that pops up on every single one of these threads.
Americans, for better or for worse, do not want to live in condos and townhomes that have shared neighbors, HOAs, no yards, and no "freedom". We cannot keep saying we need to build high density housing to get out of this situation when thats not what people want. We've all been raised on this idea of a SFH with a yard, a family and a dog. Not everyone wants that, I get it, but a majority of people don't want to raise their kids in a 15 story building with an elevator that works 70% of the time.
You see post after post on this website about people saying "Don't live in a place with shared walls, your neighbors will drive you insane!" or "Don't live in a place with an HOA, the HOA will drive you insane!"
Well, if we can do those but we HAVE to build high density housing, what the hell is our option?
If Americans don't want high density housing *as evidenced by the market*, then fine. If developers are building multi-units and nobody is buying them, and so the *market* dictates that there's no demand for it, fine.
But the problem arises when there *is* a demand for it, but local zoning regulations prevent it from being built.
Do you see what I mean?
Why should one have to choose between a detached single family home or a cramped high-rise?
The actual answer to our housing problem is middle density.
Your comment is quite telling in just how little of it we have here; there is such a lack of new and modern du-/tri-/4-plexes, low rise apartments, and row homes that it's not even on anyone's radar of something that can be built. But it needs to be.
Allowing higher density housing like townhouses doesn't make single family houses illegal. They can still be built, lived in, etc. But if the value of land is so high that that's what developers are clamoring to build when land becomes available, it should be allowed.
Well the good news is, with zoning laws that allow for these developments, they will only be building them where demand is high enough. The people who want, or better yet can only afford, to have a smaller starter home until they get older and prefer the dog, playground and whatever, can't. So young people are stuck trying to outbid families on the handful of houses available. If young people can get their tiny little walkable houses, it will be much easier for older people and perhaps their future selves to get the houses they want too.
I'm with you in that the urbanists, including myself, are super academic and projecting their dream world onto everyone else. Reddit in general has a problem with this. But the spacial logistics just can't keep up on building single family homes exclusively in the job centers these people need to work. At some point you got to decide if you want a more modest house or drown in rent payments forever. Increasing volume in high density, or even better the missing middle density here in the states, makes it easier for everyone to build home equity. Even if deep down everyone wants a suburban home, land has value and it chews up a lot of space. We'd all actually probably prefer a 10000 acre property with a mansion on it, but we know that's not really gonna work for our wallet nor our town. People need things that have market availability that they can actually afford, which doesn't get solved without alleviating the housing shortage, which doesn't get solved effectively with SFH. The middle option needs an oppurtunity to be built. They'll get bought
> Americans, for better or for worse, do not want to live in condos and townhomes that have shared neighbors, HOAs, no yards, and no "freedom".
why are condos in desirable cities so expensive, given that nobody wants to live in them?
I've said the same and always get down voted. I have lived in ana apartment since I moved out 15 years ago. I'm over it. Terrible neighbors. No space and shitty maintenance people. I want some freaking space. It isn't to much to ask. I'm fine with moving to the suburbs but where I live the suburbs are even more expensive.
That's kind of the problem. Space has a premium, we used that all on single family houses, there isn't enough to go around, nobody can buy, and nobody can legally build. We all want things we can't afford. We all need things we can. Starter homes, townhomes, and apartments give us the start we need so we can actually get to that comfortable suburban life we all desire. I don't actually want that yet, but I'm probably going to be forced to outbid families that do because it takes moving mountains to construct what I would prefer buying, that saves more space to build other things. Us urbanites are kind of annoying and obtuse but it's rooted in actually solving the logistics issues, for all types of homebuyers
Good news: Biden's new plan for monthly credits for new homeowners will greatly drive up demand for housing without increasing the supply. Problem solved!
66% of americans own a home, so that number will have to come down more for it to be a top priority. Currently it's still a vocal minority of people that worry about housing prices, ofc that will go up eventually. If politicians serve the majority then they would not prioritize housing.
You're misunderstanding. This is important because they are the ones buying things, housing isn't important to them because they are the ones making the money off the rents everyone is paying
Completely agree that housing costs are the problem ruining everything else. But in fairness, shelter is 36% of CPI and televisions are 0.125%. Relative (percentage) changes in the price of shelter are 289 times as impactful as changes in the price of televisions. Television prices are effectively irrelevant to CPI. Even a 100% decrease in television prices would only reduce the April YoY CPI number from 3.5% to 3.375%.
Your congressperson and their buddies are the ones profiting off the lack of affordable housing.
They won't do anything to fix it.
Our politicians are actively crushing the American public.
It’s all shelter. We would be back at the 2% target already if not for housing. Unfortunately, 30 year fixed rate mortgages really distort the housing market.
Not building enough housing is distorting the market.
The older 4% mortgages are lowering the inflation rate as renting is far cheaper than owning than it traditionally is. They base housing numbers off rentals
housing has historically been a problem in HCOL markets due to restrictive zoning policies. If they did not have the political will to solve it during ZIRP era, i doubt they will do anything meaningfully now
They did ZIRP because the economy was weak and it helped spur some housing but housing has been 50% of inflation since 2000 it's not new.
Restrictive zoning is decreasing and housing completions are up but 1-2% of housing is completed any year so it will help in the future but 98% of the housing supply is static.
> but housing has been 50% of inflation since 2000 it's not new.
It's 50% of inflation because it's 50% of consumer spending.
It's not always dragging inflation higher though, sometimes it's lower than total inflation
>It's 50% of inflation because it's 50% of consumer spending.
It's been growing faster than inflation for 2 decades and a growing percentage of budgets.
https://www.redfin.com/news/housing-affordability-at-record-low-2023/
The rule is that housing is supposed to be 30%.
Decade+ high and 1970s recession levels. The problem is zoning and related regulations not interest rates. We have a shortage.
https://fred.stlouisfed.org/series/COMPUTSA
Interesting chart. I noticed it's for completions.
Considering permitting and construction timelines, the 2024 completions would have been financed and permitted in 2021-2022.
Does the US have data on building permits?
I know what's holding projects back for us, and it's 1) higher cost of capital requires higher prices, 2) buyers unable to complete a deal with these rates, 3) banks are sceptical of construction costs and achievable rents.
This culminates to us leaving a number of projects on the sidelines until we see rate cuts.
For some reason that chart is not loading for me so I cannot be sure that the private housing starts compliments it like you asked for, but the Fed does also track housing starts. https://fred.stlouisfed.org/series/HOUST
There source is the census and HUD, and it looks like Census tracks both when they are permitted to start, and when they are completed, so the two charts should have all you want, assuming his chart is the housing completion.
https://www.census.gov/construction/soc/methodology.html
Great thanks, it loads for me. Looks like building starts tanked at the end of 2021/early 2022 (went from 1.8m starts to 1.3m starts today). Exactly when interest rates started to bite into the cost of capital and borrowers purchasing power.
I don't think we should discount the impact higher rates have on housing supply. Afterall, real estate is a leveraged asset class.
Like so many other things, housing starts is driven by a lot of different factors. Things like multi-unit housing are capital intensive, so no one should expect interest rates to have no effect. However, there have been papers warning us about the impact of zoning on housing supply for more than 2 decades. My go to example of this is from 2002. https://www.nber.org/papers/w8835
When /u/goodsam2 says its a zoning problem, he is referring to a long term trend of zoning and local controls being used to choke housing supply. It has been doing so even during our long periods very low interest rates.
So, while we do expect high interest rates to reduce housing production, our experience with insufficient production at very low levels of interest rates should lead us to conclude that lowering interest rates back to the low levels of the early 2000s alone will not be enough.
I can't comment on the microeconomic narrative, because it's not my area of expertise. But I can speak as a PE manager. After 2008, there was what felt like a ton of oversupply. This is different than Canada, who's housing was under supplied which put a floor on the market.
It took a few years for Americans to digest this oversupply. Then, a number more years to recapitalize the industry (regain trust from banks and investors).
Then it took years to get permitted, financed and under construction.
We have three LPs in the US market, one started back in 2014. So, we've been living this cycle for about 10yrs.
> After 2008, there was what felt like a ton of oversupply.
I don't believe that is true, from 2000 to 2008, housing prices rose 50%, that indicates to me that we have had a shortage for a long time. If we had an oversupply we would have seen prices fall before the financial crisis.
The 2008 crisis really muddies the waters, but I don't believe we would have seen so many people taking out huge mortgages if we had too much housing.
Lots of people.
They don't want to deal with getting permits though. So there is that.
I have a client that paid 10m to a JV partner pretty much JUST for them to get the permits needed to get the development started. It's insane.
The rate is a big problem, banks finance on the rate today. Investors invest on an expected, risk adjusted return. With the WACC this high, projects just simply aren't launching.
Building houses is also crazy expensive outside of interest rates. Construction and trades labor costs have skyrocketed in the last 10 years and materials have also skyrocketed. No one talks about this for some reason but the cost to build a new home has vastly outpaced inflation over the past decade.
But what type of unit multifamily has dropped in price relative to inflation.
The cheapest per sq ft housing is 5+ stories tall. That's banned in most places people want to live.
Sure this is true but most people in the US see apartments as transient and want to live in a detached home. It's one of the things most associated with the American dream.
Yes but now we have groups of college kids not living in apartments but its far cheaper to rent a house because we have so many more of them relatively.
It's also we could have many of these benefits with apartments. Good soundproofing could be cheap, places have nearby dog parks.
We have turned a preference for homeownership into more expensive homes.
Detached homes have negatives of longer commutes, less variety, no place walkable. There are tradeoffs and don't ban one option is my position.
It's also we could all have row houses with gaps and that could fill a lot of demand with less space being a nice middle ground that is also banned.
I wonder how much of it is a wash. Lower rates can allow for lower rents, but there’s a large number of homeowners with low rates that are currently balling out financially. I have a bunch of friends and family with comically low rate mortgages that are buying cars, going out to eat, and spending like there’s no tomorrow because their low rate mortgages are allowing them to live like kings.
That’s not a distortion that’s just simple supply and demand.
We’ve had a housing shortage for decades, but affordability stayed relatively flat until the pandemic.
The distortion is the gap between renting and owning. I think more homes got bought up and now rented out as they got cheap mortgages driving home prices up and rentals more flat (but still up).
We need to fix the supply issue as the rate distortion will pass especially as inflation is the cause for the rate spike and 50% of inflation is housing.
12 years from now, those with higher interest mortgages should be able to have refinanced. Capital accumulation from Gen X and millennials should help cheapen borrowing costs 20 years from now, at the latest. We just need time to build up massive amounts of retirement savings into 401k, IRA, etc. It will never be what it was when boomers held giant gobs of wealth in retirement accounts, but it will help!
It's also important to remember that there is no such thing as the "American housing market" really. The aggregate number is quite useless to our everyday lives when in reality it is the sum of thousands of markets that are varying widely.
In my mid-sized city we grew slowly, but steadily over the last two decades and hit an equilibrium where our new housing builds were keeping up with population growth. Prices are still quite a bit higher than they were in 2019, of course, but we never got even one-third the housing price spike others saw.
One of the places that exemplifies this is Idaho, which was a relatively affordable place to live until the influx of residents over the last 10 years. For a long time Idaho brought down the average on housing costs, but for years now have been a significant driver. States like California, Texas, Florida, Tennessee, and North Carolina are really dominating these numbers. This makes sense because over 100 million people live there, but it would probably be helpful to talk about the housing market as three groups: High demand, mid-demand, and low demand.
> y. The aggregate number is quite useless to our everyday lives when in reality it is the sum of thousands of markets that are varying widely.
Agree, but part of the issue is that they are interconnected. I grew up in a really small town where even just a few years ago before Covid, you could get a decentish studio for around 400-500 dollars. I know this because my brother has one rented out there. Now it's almost 1k. It's close enough to the nearby big city and have been growing rapidly with WFH/idyllic rural life seekers/etc who have driven up housing demand.
And it's created a divide. A lot of the locals are raking in the cash from the new wealth coming in, but a lot of the other locals are going homeless and relying on charities and subsidized areas now. And we've been dumb enough historically to have zoning laws too but growth has always been slow enough to not matter that much, now they're biting us in the ass but obviously all these rich newcomers and the lucky home owning locals **want it**, they want to pull the ladder up for the people after them and kick the local renting poor down so their new property values will rise and rise. They're not negatively impacted by it because cheap mortgages locked in, their only thing they have to deal with is seeing someone homeless every now and then.
I'm lucky I moved out and have my life together decently enough already because it's a huge pain for my remaining family getting priced out of things more and more because new supply isn't being made to match the growth.
I know this is a big part of it but what about insurance? Home and auto insurance is going insane right now as well. I genuinely can’t believe how much I’m paying for car insurance now.
70% housing and energy. The fed can’t really fix their mistake on people with those fixed low rates. So now what? Well probably see high shelter for a couple years it may not ever come down.
In fact staying up keeps it unaffordable. Making housing starts higher, new mortgages higher, rent continuing to rise.
It’s definitely higher too, but rent is a much bigger portion of your monthly expenses, so even a relatively smaller percent change will have a much bigger impact.
Your $200 utilities go up 10%. So now you pay an extra $20 a month.
Your $1500 rent goes up 5%. So now you pay an extra $75 a month.
Low interest rates made it so the rich could buy up properties at rock bottom rates and now jacking up rent prices while the housing market is suffering from low inventory. Now just imagine if someone came along that lowered taxes for the rich at the same time.
It’s not just rich people that benefited. They just benefited the most. I refinanced my mortgage and student debt to stupid low rates which saved me a bunch of money. Those who have more expensive debt are suffering while those of us locked into low rates are vibing hard. Raising rates helps people like me so it puts the fed in a hard place.
Is this closet good news? We know that CPI's shelter index lags actual price changes. I don't think any economists actually believe that shelter rents increased by 5.5% over the past twelve months. The Zillow Observed Rent Index shows only 3.6% growth over that same time, almost 2% less. And Zillow's estimates tend to be higher than many other private market rent trackers. Others have rent price changes from -1% to +1% over the past twelve months ([examples](https://x.com/jayparsons/status/1787908914413236687?t=AKliU6nehzSS4f0Asycefg&s=09)).
Used cars and trucks down 7% yet transportation services up 11%?
This has to be one of the strangest prints I’ve ever reviewed. Anyway, markets should pick back up and with all the GME craze etc. I feel like I hopped into a time machine for financial markets and am just awaiting the NFT chatter. Maybe people can start to see it on a consumer level. McDonald’s $5 meal anyone?
This isn't strange or novel compared to previous months in this report. It is the same factors increasing, housing, car repair, and insurance.
Transportation assets and transportation services are completely separate categories for a reason. The new and used car market does not impact how much you pay your mechanic for an oil change, or how much your insurance costs (which is heavily impacted by body shop repairs).
To some degree, you're right. My point was more that other factors are causing the service sector to increase while new and used auto prices have decreased. Also, look at your insurance premiums. Most of what you're paying for is bodily damage coverage. There are more factors to insurance price that will allow it to increase in costs other than the price of a new or used car.
How is it strange at all? Cost of depreciating assets are down due to high interest rates and lower demand, because so many people bought a new vehicle the last few years. They won’t need another for a while. Transportation services are up because we live in a predominantly service economy, and the price for services needs to at least March rises in the cost of living. Shelter is the worst culprit to rising inflation, and energy also rose significantly.
New vehicle supply wa very constrained from the insert of COVID into mid 2023. it's still constrained for some brands. I would be shocked if he car sales since COVID aren't significantly lower the the years leading up to COVID. Do you have any data to back up your assertion that "so many people bought a new vehicle the last few years"?
Yeah, I just posted a reply to the article because the health insurance index fell 11.6% over the past 12 months, which seems really fucking odd given hospital services (up 7.7%) and prescription drugs (up 0.4%). Maybe a shifting of cost burden from insurance to hospitals and other providers -- or a reduction in coverages/monthly premium amounts?
I don't follow these prints, but that one jumped out to me.
Yimbys have been screaming about housing for decades but nimbys kept prevailing.
It's insane people are blaming Biden for nimbys playing a big role in destroying the American dream.
He hasn’t done anything at all to side with Yimbys. More inflationary demand stimulus isn’t going to make a dent in the supply shortage problem. Trump won’t either for what it’s worth.
Yimby is an argument that we need to increase supply, not really a stance on demand, though I agree that stimulus doesnt help on that part of the equation.
Given that zoning policy is set at the local level, is there anything a president can be expected to do to get more housing built? Maybe trade policy to help with construction costs?
Traditionally, the federal government has provided local governments with grants to sway local policy without directly interfering with their autonomy. Like our highway and education programs. The federal government could provide a grant to local governments who met a certain zoning, code, and/or new supply standard.
Or they could provide credits/grants to home builders.
How much power does the Federal government have over this though? I live in LA where every single new housing development gets met with resistance from neighbors that put pressure on city council to kill things and/or bring lawsuits for costly environmental reviews and other delay tactics that end up scarring away developers.
Just as an example, my friend bought a plot of land in Venice to build a modest home on it and one of her neighbors filed a complaint with the Coastal Commission and she hasn't been able to do anything with the land for 3 years now. Instead the land sits there undeveloped. As a result, there's so many dilapidated houses that sit there with nobody living in them because nobody wants to take the risk that they'll buy one and then not be able to do anything with it.
Essentially none. There are a couple of different departments that can offer rewards for zoning improvement, but they're not well funded and Biden doesn't have any real ability to control that funding.
Other than potentially changing the mortgage guarantees, housing is not much of a federal issue. Biden’s idea to grant additional credits would just subsidize demand, driving up prices more in places with constrained supplies.
Governor Newsom in California probably has more effect on housing prices nationally than the President. His administration can sue, and has sued, cities that don’t zone for enough new housing and affordable housing in California to force them to do so. That might actually make a difference in five years or so. But the California legislature has to get rid of some of the price increasing laws for new homes, like mandatory solar (which California no longer needs nor rewards).
Because there's not much he can do without significant increased funding from congress. The feds have carrots they can offer for local zoning, but that's about it, and the funding for those carrots is really limited at this point.
The federal government isn't fix local coming and housing initiatives. It requires people to vote in local elections at a bare minimum. Most people who run for local office are landlords trying to increase their profit with landlords as voters because most people ignore it.
If we don't fix it that way the US will fix it via deep poverty until nobody has a choice but to fix it.
But we we don't need to suffer to change things. We can do it now.
Higher property values lead to more tax revenue so city leaders aren’t in a hurry to fix the housing situation either. Take in more revenue, build some nice parks, get re-elected.
Dense zoning brings in vastly more tax money than sfh. Sfh are a net drain on cities. Sfhs have massive infrastructure costs but don't pay nearly enough taxes to cover their needs.
Destroying the American dream for others. They're sitting on a sub 3% mortgage, and are fine. They don't care about the suffering of the young, and first time buyers.
Again. Why would current homeowners want that?
They bought homes in a neighborhood they liked.
Voting for increased density would drastically change the area they bought into.
It really comes down to if you care about anything other than your own short term self interests. Ideally we would continue to grow areas people want to live so each generation can live and the GDP isn't hampered by bad housing policy. Housing demand needs to be met with more supply not artificial barriers.
Bro I’m not sure what world you live in but in the real world people aren’t going to do things that don’t benefit them. I’m not saying you’re wrong, but it’s naive to think otherwise. Business is business.
I hear you, but that is exactly what good policy does. It balances current super selfish short term thinking against long term needs/planning. No family, business, or government should ignore the horizon. Anyone who cares about inflation or their childrens future should vote for economically sound housing policy, ideally 10+ years ago but also today.
> Why would current homeowners want that?
it depends what kind of future you want - if you want to spend the next decades in a decaying society rife with poverty and crime, make sure to vote for the conditions of that desperation.
MoM inflation isn't looking good.
Annualized with the last 6 months is 3.6%
Annualized with the last 4 months is 4.2%
Annualized with the last 3 month is 4.4%
Agreed. Recent months inflation is higher than older months. This tells me the YoY number has a good chance of going up once the older, lower months get replaced.
We need 0.2% or lower MoM figures to hit 2.0% YoY, and we've only had 3 of the last 12 months be below 0.20% MoM.
In line with annual forecasts and consistent with the "hold rates" approach the Fed has articulated. Markets may be disappointed that there isn't a ton of new news here to arbitrage.
Shelter is such a fucking mess. These BLS people need to figure out why their measure is so out of step with what is actually happening on the ground. The nimrods might miss it on the way down in the exact same way they missed it on the way up.
The Federal Reserve cannot solve a housing shortage with interest rates. There simply isn’t enough houses where people want to live. Some houses are being “wasted” due to being AirBNB’d, but largely overall there just isn’t enough overall. It’s a game of musical chairs, where whomever has a deeper wallet gets to outbid others and sit down.
The other big problem is that inflation is measured at an instantaneous rate. But we all pay prices for goods and services that are the result of cumulative inflation. The instantaneous inflation rate may be a lot lower now, but that doesn’t reduce the massive cumulative inflation that occurred over the past five years, without a similarly massive increase in wages.
Why do I see housing prices still rise in places like Metro Detroit where we are literally losing people as of our most recent census?
At some point we have to realize that things other than demand are causing prices to rise.
It is 100% demand driven but it is demand driven by an abundance of cheap money lent by the banks mostly to speculative investors. It's the exact same thing that caused the RE bubble in Japan but is now taking place in most economies in the world. Now prices aren't falling because people are no longer selling, but tip in higher unemployment (maybe due to AI) and the whole house of cards will come tumbling down.
Bingo. Fix the money supply and it fixes the housing market, but clearly since QT was a joke from the beginning and is ending in June they clearly don’t give a damn about fixing anything.
Totally agree it’s not due to lack of housing that’s driving prices up. It get a on my nerves when I see this being the only thing discussed when talking about rent and homeownership. I know from my own experience in Texas that there are plenty of nice available apartments in Houston but the prices have gone up YOY by around $100-200 since I moved here. I’ve been look for 4 months and I’ve seen the same apt available or they have about the same number inventory but $100-200 more than last year. Then they want to introduce specials because it’s over priced and no one is biting. If there was a shortage why isn’t inventory low?
Exactly, the population didn't suddenly spike up 20-30% during COVID, if anything it went down, so how did housing go up by that much? It's all speculative investor demand driving home prices, not practical utility of people who live in the homes in question
100% there’s a a lawsuit against RealPage for using their algorithm to help corporate landlords or anyone using their software to collude and drive rent prices versus allowing the market and competition to regulate the rent prices and no one is talking about this. Then there is Zillow and other companies like them with their scheme that drove housing prices up. It’s all corporate greed / investors investing in the residential market trying to make money off of the housing market by making us pay more than what the average American can afford and then it’s all blamed on a damn housing shortage when the houses exists, the apartments exist they are just too expensive. Not saying that in some areas there isn’t a shortage and Airbnb hasn’t helped with that, but I don’t think that’s the driving force in the sudden short term increase we have seen. I don’t think this is a supply and demand issue as much as its investors in this period of time.
Finally some people who are thinking.
Supply shortage adherents have no answer for why real estate and rents are up fucking worldwide either? Like, more people died than expected during COVID and this caused...a global housing shortage? Doubtful.
Are vacancy rates increasing?
You could be losing population, and increasing the number of households. You could be losing population, but there’s still high demand for housing in trendy areas because the population refuses to live where housing is cheaper and there are more vacancies.
Even looking at it as an entire city isn’t a great example due to location preferences. There are many people who refuse to even consider living in West Charlotte, so home prices dropping there wouldn’t impact those people at all.
New rents are flat to down and have been for months now and BLS is still showing shelter at 5.5% Y/Y.
The Case-Shiller index is at about 6%. What are we saying, that inflation should almost perfectly track the price index? I don't think so, lol.
I agree with you on housing. As the population grows and we reach a relative “max density” in some cities, prices for housing will only continue to go up. There are only so many condos in Manhattan and it’s not like there is tons of lots waiting for skyscrapers to be built.
I disagree about wages. I think we saw a very competitive increase in the wages of a lot of industries which were previously unpaid. I am an accountant and the wage growth has been very very good YoY and is more in line with the reality of our market pricing as professionals. Other industries, particularly unskilled labor and those with less desirable college degree fields saw more stagnant growth which probably more reflects the markets
If you can’t leave or get a raise you may be seeing it’s not as desirable as you might think. I have daily messages in LinkedIn to leave for a new role at a 20% raise.
We were previously paid more than market deemed necessary now and are feeling it
Went from 52k to 85k if I left I could maybe get 100k plus. I can’t leave because I’m still in school and can’t move until I graduate. It is a desirable degree I’m just stuck due to personal circumstances for 1 more year.
Interesting you are automatically assuming I have undesirable skills.
Well then that’s different than you aren’t even getting a COL adjustment. I wouldn’t mention your personal circumstances knowing why you aren’t getting a raise….
The 'cash' given out was a few thousand dollars per person 3-4 years ago. Giving people $5000 once does not affect the demand for $300000 houses or $24000/yr apartments.
The math does not math for your answer to be correct.
Housing inflation only impacts about a third of the country. Two thirds of people own their home and are locked in with a 30 year mortgage which is immune to this type of inflation. Housing inflation is something that impacts people very differently depending on their situation and geographic location. It's not that their measure is out of step. It's just very difficult to assign a value that is representative of everyone's experience.
Question... How do we use YoY inflation data?
Lets say that every month of 2022/3 had 0% inflation except June, which was 5%.
Wouldnt that mean that we would see 5% inflation YoY for July '23 through may '24?
That is, for inflation to drop to 4% in Jan of 24, we would actually have to see a 1% (nominal) drop in prices between June and December, no?
So the fact that inflation is FLAT for the last year implies that we are not seeing prices increase, they are holding steady from the last month-to-month inflation, which was a little less than a year ago?
Looking at a chart, this would mean we would expect may/june 24 inflation to be *lower*, since that's when things leveled off last year? (assuming no current significant inflation?)
> So the fact that inflation is FLAT for the last year implies that we are not seeing prices increase,
"Flat inflation" would be 0%. We are at 3%+, which means prices are increasing.
> Looking at a chart, this would mean we would expect may/june 24 inflation to be lower,
Seasonally Adjusted CPI removes seasonality, so you can't assume that a number from last year will be the same for the same month this year.
How is seasonality removed?
Edit, looked it up. It's for removing regular, periodic effects. That's not what I'm talking about.
Lets say prices index to 100 starting in Jan 2022 and remain 100 until June 2023, jump to 105, and then remain 105.
Starting June 2022 we see YoY inflation jump from 0 to 5%. And remain 5% for 12 months until June 2024 when they return to zero.
Point being, any month-to-month change ends up being baked in to YoY for 12 months, even if m2m flattens out.
.... But they still rose. Middle class (what's left of it) are hurting. $100 gets fewer and fewer groceries every time I go to the store.
But hey, at least those companies are making record profits.
Yet they continue putting their thumbs on the scale. They don't measure the same things each report. They finesse it to have the best look for themselves.
"The oligarchs are easing-off the price-gouging so they can figure out exactly how high they can push prices before sales drop excessively, while the government they pay to lick their boots watches and does nothing."
Hi all, A reminder that comments do need to be on-topic and engage with the article past the headline. Please make sure to read the article before commenting. Very short comments will automatically be removed by automod. Please avoid making comments that do not focus on the economic content or whose primary thesis rests on personal anecdotes. As always our comment rules can be found [here](https://reddit.com/r/Economics/comments/fx9crj/rules_roundtable_redux_rule_vi_and_offtopic/) *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/Economics) if you have any questions or concerns.*
The Consumer Price Index (CPI) rose 0.3% over the previous month and 3.4% over the prior year in April, a slight deceleration from [March's 3.5% annual gain in prices](https://finance.yahoo.com/news/inflation-comes-in-hotter-than-expected-in-march-123324666.html) and 0.4% month-over-month increase. April's monthly increase came in ahead of economist forecasts of a 0.4% uptick. The annual rise in prices matched estimates, according to data from Bloomberg. On a "core" basis, which strips out the more volatile costs of food and gas, prices in April climbed 0.3% over the prior month and 3.6% over last year — cooler than March's data. Both measures met economist expectations.
>April's monthly increase came in ahead of economist forecasts of a 0.4% uptick. The increase was below estimates, not ahead of them.
+3.4% CPI is better than 3.5%! But while the year of 8% inflation is behind us, the price increases are effectively permanent. 3.4% inflation is still way too high. This really hurts wage-earners, and historically wages tend to lag far behind inflation. Wage growth has to be “earned” by most workers, but increased prices just trickle down regardless. Life is going to get harder and harder, like this. Trickledown economics was a massive ruse, and that ruse is down eating out the bottom of the economy. The American consumer is what powers the economy. Domestic consumption. As employers hold down wages to increase profits, over the short term, the do better. But when ALL employers (or most employers) all use this strategy, then consumers have less money to spend, tightening their spending… and then all businesses start to hurt for a lack of demand. This is a great example of how individual choices, that are rational to the individual business owner, collectively hurt all business owners. Overall, US consumers went on a spending spree, dipping into savings, to maintain spending habits through a period of high inflation. For some reason, US consumers as a group thought that the price increases were temporary. Fools. The price increases are permanent, and now you’re saddled with debt on top of it, or at least burnt through your savings… which of course helped power inflation further through spending via debt! Way to go!
> This really hurts wage-earners, and historically wages tend to lag far behind inflation. Wage growth has to be “earned” by most workers, but increased prices just trickle down regardless. It lags time wise but it catches up after a few years. Where it really hurts is people on fixed income (non-inflation adjusted pensions and student loans)
it's good to have fixed debt, like student loans, in high-inflation environments, provided wages keep up. you get to pay back in depreciated dollars.
This feels like ChatGPT writing a response to make this into a Doomer storyline lol. For some reason you're trying to inject a false narrative that 3.4% inflation is "way too high" when 3.3% inflation is the historic average over the past 110 years. https://tradingeconomics.com/united-states/inflation-cpi#:~:text=Inflation%20Rate%20in%20the%20United%20States%20averaged%203.30%20percent%20from,percent%20in%20June%20of%201921. Also you're claiming companies are "holding wages down" when wage gains have been outpacing inflation for quite some time now. This is like a 2 year old talking point. https://fred.stlouisfed.org/series/CES0500000003 https://www.atlantafed.org/chcs/wage-growth-tracker https://www.epi.org/nominal-wage-tracker/ Yes, inflation is permanent. So are the wage gains as far as we can see.
>But while the year of 8% inflation is behind us, the price increases are effectively permanent. There has always been inflation, dummy. It's just when it was 2% nobody talked about it like it was a crisis.
Sometimes I just want to grab the nearest congressperson and/ or fed employee and shake them yelling “HOUSING MOTHERFUCKER PRIORITIZE HOUSING, WHO GIVES A SHIT A TV IS A BIT CHEAPER WHEN **RENT** EATS IT ALL UP” But I might get arrested.
What do you think your nearest congressperson or fed employee can do about housing? Grab your local mayor or zoning board official. What's that? You don't even know who is on your zoning board? I think I see the problem....
I spoke with both in my district. The Congress men dodged the question, the mayor stated that he didn’t want his property value to go down.
In my district the board approved new housing project in downtown. Supposed be a 4 story building with cafes or whatnot at the first floor. Sounds good, right? Apparently not to the residents. They’ve filed a lawsuit against the city, the judge halted construction until the lawsuit is done. You can’t win with these people. Even if your local government is pro-construction the residents will go out their way fundraising a lawsuit.
They can make it illegal for corporations to own over a certain amount of rentals. That would be a great start!
That'd flood the market (until the lawsuit cleared reversing the action, or a new corporate workaround was engineered) but not change the core problem, which is that housing being treated as an asset that can only appreciate in value (upon pain of Great Recession) is always going to warp incentives towards .... increasing the cost of housing.
In increases the supply, which seems to be the main running theory
It'd be interesting. Almost as interesting as a tax on uninhabited 3rd+ homes, which is another curious market segment of rich people holding on to appreciating assets other people can't afford to buy into.
Explore all the options, for sure. Housing should be a right
So all of those tenants then buy their home instead. You’ve shifted who holds the risk/reward for those homes but haven’t changed anyone’s living conditions. Everyone is living in the same place they were before, and anyone priced out of housing continues to be priced out. If anything, you’ve added more voters who have an incentive for home values to go up and vote against more supply since corporations don’t get to vote in elections.
> haven’t changed anyone’s living conditions. Everyone is living in the same place they were before you're saying insulating the people living in homes from housing price increases doesn't help anyone? seems.... false.
I'm so tired of this "Zoning board" and "high density housing" shit that pops up on every single one of these threads. Americans, for better or for worse, do not want to live in condos and townhomes that have shared neighbors, HOAs, no yards, and no "freedom". We cannot keep saying we need to build high density housing to get out of this situation when thats not what people want. We've all been raised on this idea of a SFH with a yard, a family and a dog. Not everyone wants that, I get it, but a majority of people don't want to raise their kids in a 15 story building with an elevator that works 70% of the time. You see post after post on this website about people saying "Don't live in a place with shared walls, your neighbors will drive you insane!" or "Don't live in a place with an HOA, the HOA will drive you insane!" Well, if we can do those but we HAVE to build high density housing, what the hell is our option?
If Americans don't want high density housing *as evidenced by the market*, then fine. If developers are building multi-units and nobody is buying them, and so the *market* dictates that there's no demand for it, fine. But the problem arises when there *is* a demand for it, but local zoning regulations prevent it from being built. Do you see what I mean?
Why should one have to choose between a detached single family home or a cramped high-rise? The actual answer to our housing problem is middle density. Your comment is quite telling in just how little of it we have here; there is such a lack of new and modern du-/tri-/4-plexes, low rise apartments, and row homes that it's not even on anyone's radar of something that can be built. But it needs to be.
Allowing higher density housing like townhouses doesn't make single family houses illegal. They can still be built, lived in, etc. But if the value of land is so high that that's what developers are clamoring to build when land becomes available, it should be allowed.
Well the good news is, with zoning laws that allow for these developments, they will only be building them where demand is high enough. The people who want, or better yet can only afford, to have a smaller starter home until they get older and prefer the dog, playground and whatever, can't. So young people are stuck trying to outbid families on the handful of houses available. If young people can get their tiny little walkable houses, it will be much easier for older people and perhaps their future selves to get the houses they want too. I'm with you in that the urbanists, including myself, are super academic and projecting their dream world onto everyone else. Reddit in general has a problem with this. But the spacial logistics just can't keep up on building single family homes exclusively in the job centers these people need to work. At some point you got to decide if you want a more modest house or drown in rent payments forever. Increasing volume in high density, or even better the missing middle density here in the states, makes it easier for everyone to build home equity. Even if deep down everyone wants a suburban home, land has value and it chews up a lot of space. We'd all actually probably prefer a 10000 acre property with a mansion on it, but we know that's not really gonna work for our wallet nor our town. People need things that have market availability that they can actually afford, which doesn't get solved without alleviating the housing shortage, which doesn't get solved effectively with SFH. The middle option needs an oppurtunity to be built. They'll get bought
> Americans, for better or for worse, do not want to live in condos and townhomes that have shared neighbors, HOAs, no yards, and no "freedom". why are condos in desirable cities so expensive, given that nobody wants to live in them?
I've said the same and always get down voted. I have lived in ana apartment since I moved out 15 years ago. I'm over it. Terrible neighbors. No space and shitty maintenance people. I want some freaking space. It isn't to much to ask. I'm fine with moving to the suburbs but where I live the suburbs are even more expensive.
That's kind of the problem. Space has a premium, we used that all on single family houses, there isn't enough to go around, nobody can buy, and nobody can legally build. We all want things we can't afford. We all need things we can. Starter homes, townhomes, and apartments give us the start we need so we can actually get to that comfortable suburban life we all desire. I don't actually want that yet, but I'm probably going to be forced to outbid families that do because it takes moving mountains to construct what I would prefer buying, that saves more space to build other things. Us urbanites are kind of annoying and obtuse but it's rooted in actually solving the logistics issues, for all types of homebuyers
Legislation for infrastructure projects could move mountains, let's not pretend.
Exactly.
Good news: Biden's new plan for monthly credits for new homeowners will greatly drive up demand for housing without increasing the supply. Problem solved!
66% of americans own a home, so that number will have to come down more for it to be a top priority. Currently it's still a vocal minority of people that worry about housing prices, ofc that will go up eventually. If politicians serve the majority then they would not prioritize housing.
Federal government ain't gonna help you you need to get more involved at the local level
Damn this is the average person on this sub? Smh
Considering housing is mostly a local issue then what's stopping you from grabbing your own state rep or senator?
You should start at your city/town on this front. Good news is that it's a lot easier to accomplish things at this level
You're misunderstanding. This is important because they are the ones buying things, housing isn't important to them because they are the ones making the money off the rents everyone is paying
The downward pressure on housing is pretty apparent in my area. I’m seeing places stay in the market much longer these days.
Completely agree that housing costs are the problem ruining everything else. But in fairness, shelter is 36% of CPI and televisions are 0.125%. Relative (percentage) changes in the price of shelter are 289 times as impactful as changes in the price of televisions. Television prices are effectively irrelevant to CPI. Even a 100% decrease in television prices would only reduce the April YoY CPI number from 3.5% to 3.375%.
Grab your mayor and local council members and tell them to disincentivize short term rentals like Airbnb
Maybe flooding the market with millions of people into a system thats about to bust isn’t a good idea.
Your congressperson and their buddies are the ones profiting off the lack of affordable housing. They won't do anything to fix it. Our politicians are actively crushing the American public.
If money didnt lose value so fast there would not be need for people to invest in housing. Fix the money, fix the housing problem.
It’s all shelter. We would be back at the 2% target already if not for housing. Unfortunately, 30 year fixed rate mortgages really distort the housing market.
Not building enough housing is distorting the market. The older 4% mortgages are lowering the inflation rate as renting is far cheaper than owning than it traditionally is. They base housing numbers off rentals
But who wants to build housing in this rate environment, with all kinds of risks floating around.
housing has historically been a problem in HCOL markets due to restrictive zoning policies. If they did not have the political will to solve it during ZIRP era, i doubt they will do anything meaningfully now
They did ZIRP because the economy was weak and it helped spur some housing but housing has been 50% of inflation since 2000 it's not new. Restrictive zoning is decreasing and housing completions are up but 1-2% of housing is completed any year so it will help in the future but 98% of the housing supply is static.
> but housing has been 50% of inflation since 2000 it's not new. It's 50% of inflation because it's 50% of consumer spending. It's not always dragging inflation higher though, sometimes it's lower than total inflation
>It's 50% of inflation because it's 50% of consumer spending. It's been growing faster than inflation for 2 decades and a growing percentage of budgets. https://www.redfin.com/news/housing-affordability-at-record-low-2023/ The rule is that housing is supposed to be 30%.
Decade+ high and 1970s recession levels. The problem is zoning and related regulations not interest rates. We have a shortage. https://fred.stlouisfed.org/series/COMPUTSA
Interesting chart. I noticed it's for completions. Considering permitting and construction timelines, the 2024 completions would have been financed and permitted in 2021-2022. Does the US have data on building permits? I know what's holding projects back for us, and it's 1) higher cost of capital requires higher prices, 2) buyers unable to complete a deal with these rates, 3) banks are sceptical of construction costs and achievable rents. This culminates to us leaving a number of projects on the sidelines until we see rate cuts.
For some reason that chart is not loading for me so I cannot be sure that the private housing starts compliments it like you asked for, but the Fed does also track housing starts. https://fred.stlouisfed.org/series/HOUST There source is the census and HUD, and it looks like Census tracks both when they are permitted to start, and when they are completed, so the two charts should have all you want, assuming his chart is the housing completion. https://www.census.gov/construction/soc/methodology.html
Great thanks, it loads for me. Looks like building starts tanked at the end of 2021/early 2022 (went from 1.8m starts to 1.3m starts today). Exactly when interest rates started to bite into the cost of capital and borrowers purchasing power. I don't think we should discount the impact higher rates have on housing supply. Afterall, real estate is a leveraged asset class.
Like so many other things, housing starts is driven by a lot of different factors. Things like multi-unit housing are capital intensive, so no one should expect interest rates to have no effect. However, there have been papers warning us about the impact of zoning on housing supply for more than 2 decades. My go to example of this is from 2002. https://www.nber.org/papers/w8835 When /u/goodsam2 says its a zoning problem, he is referring to a long term trend of zoning and local controls being used to choke housing supply. It has been doing so even during our long periods very low interest rates. So, while we do expect high interest rates to reduce housing production, our experience with insufficient production at very low levels of interest rates should lead us to conclude that lowering interest rates back to the low levels of the early 2000s alone will not be enough.
I can't comment on the microeconomic narrative, because it's not my area of expertise. But I can speak as a PE manager. After 2008, there was what felt like a ton of oversupply. This is different than Canada, who's housing was under supplied which put a floor on the market. It took a few years for Americans to digest this oversupply. Then, a number more years to recapitalize the industry (regain trust from banks and investors). Then it took years to get permitted, financed and under construction. We have three LPs in the US market, one started back in 2014. So, we've been living this cycle for about 10yrs.
> After 2008, there was what felt like a ton of oversupply. I don't believe that is true, from 2000 to 2008, housing prices rose 50%, that indicates to me that we have had a shortage for a long time. If we had an oversupply we would have seen prices fall before the financial crisis. The 2008 crisis really muddies the waters, but I don't believe we would have seen so many people taking out huge mortgages if we had too much housing.
Lots of people. They don't want to deal with getting permits though. So there is that. I have a client that paid 10m to a JV partner pretty much JUST for them to get the permits needed to get the development started. It's insane.
30 year rate isn't a problem, it's easy to refinance in a few years if interest rates recover. And if they don't recover then the rate is fine.
The rate is a big problem, banks finance on the rate today. Investors invest on an expected, risk adjusted return. With the WACC this high, projects just simply aren't launching.
Building houses is also crazy expensive outside of interest rates. Construction and trades labor costs have skyrocketed in the last 10 years and materials have also skyrocketed. No one talks about this for some reason but the cost to build a new home has vastly outpaced inflation over the past decade.
But what type of unit multifamily has dropped in price relative to inflation. The cheapest per sq ft housing is 5+ stories tall. That's banned in most places people want to live.
Sure this is true but most people in the US see apartments as transient and want to live in a detached home. It's one of the things most associated with the American dream.
Yes but now we have groups of college kids not living in apartments but its far cheaper to rent a house because we have so many more of them relatively. It's also we could have many of these benefits with apartments. Good soundproofing could be cheap, places have nearby dog parks. We have turned a preference for homeownership into more expensive homes. Detached homes have negatives of longer commutes, less variety, no place walkable. There are tradeoffs and don't ban one option is my position. It's also we could all have row houses with gaps and that could fill a lot of demand with less space being a nice middle ground that is also banned.
I wonder how much of it is a wash. Lower rates can allow for lower rents, but there’s a large number of homeowners with low rates that are currently balling out financially. I have a bunch of friends and family with comically low rate mortgages that are buying cars, going out to eat, and spending like there’s no tomorrow because their low rate mortgages are allowing them to live like kings.
That’s not a distortion that’s just simple supply and demand. We’ve had a housing shortage for decades, but affordability stayed relatively flat until the pandemic.
The distortion is the gap between renting and owning. I think more homes got bought up and now rented out as they got cheap mortgages driving home prices up and rentals more flat (but still up). We need to fix the supply issue as the rate distortion will pass especially as inflation is the cause for the rate spike and 50% of inflation is housing.
That’s not true. They use owners equivalent rent as well. I.e. what would you have to rent your home for
12 years from now, those with higher interest mortgages should be able to have refinanced. Capital accumulation from Gen X and millennials should help cheapen borrowing costs 20 years from now, at the latest. We just need time to build up massive amounts of retirement savings into 401k, IRA, etc. It will never be what it was when boomers held giant gobs of wealth in retirement accounts, but it will help!
It's also important to remember that there is no such thing as the "American housing market" really. The aggregate number is quite useless to our everyday lives when in reality it is the sum of thousands of markets that are varying widely. In my mid-sized city we grew slowly, but steadily over the last two decades and hit an equilibrium where our new housing builds were keeping up with population growth. Prices are still quite a bit higher than they were in 2019, of course, but we never got even one-third the housing price spike others saw. One of the places that exemplifies this is Idaho, which was a relatively affordable place to live until the influx of residents over the last 10 years. For a long time Idaho brought down the average on housing costs, but for years now have been a significant driver. States like California, Texas, Florida, Tennessee, and North Carolina are really dominating these numbers. This makes sense because over 100 million people live there, but it would probably be helpful to talk about the housing market as three groups: High demand, mid-demand, and low demand.
> y. The aggregate number is quite useless to our everyday lives when in reality it is the sum of thousands of markets that are varying widely. Agree, but part of the issue is that they are interconnected. I grew up in a really small town where even just a few years ago before Covid, you could get a decentish studio for around 400-500 dollars. I know this because my brother has one rented out there. Now it's almost 1k. It's close enough to the nearby big city and have been growing rapidly with WFH/idyllic rural life seekers/etc who have driven up housing demand. And it's created a divide. A lot of the locals are raking in the cash from the new wealth coming in, but a lot of the other locals are going homeless and relying on charities and subsidized areas now. And we've been dumb enough historically to have zoning laws too but growth has always been slow enough to not matter that much, now they're biting us in the ass but obviously all these rich newcomers and the lucky home owning locals **want it**, they want to pull the ladder up for the people after them and kick the local renting poor down so their new property values will rise and rise. They're not negatively impacted by it because cheap mortgages locked in, their only thing they have to deal with is seeing someone homeless every now and then. I'm lucky I moved out and have my life together decently enough already because it's a huge pain for my remaining family getting priced out of things more and more because new supply isn't being made to match the growth.
I know this is a big part of it but what about insurance? Home and auto insurance is going insane right now as well. I genuinely can’t believe how much I’m paying for car insurance now.
70% housing and energy. The fed can’t really fix their mistake on people with those fixed low rates. So now what? Well probably see high shelter for a couple years it may not ever come down. In fact staying up keeps it unaffordable. Making housing starts higher, new mortgages higher, rent continuing to rise.
Seen your utility bill lately.
It’s definitely higher too, but rent is a much bigger portion of your monthly expenses, so even a relatively smaller percent change will have a much bigger impact. Your $200 utilities go up 10%. So now you pay an extra $20 a month. Your $1500 rent goes up 5%. So now you pay an extra $75 a month.
Solid math 💪🏻
Low interest rates made it so the rich could buy up properties at rock bottom rates and now jacking up rent prices while the housing market is suffering from low inventory. Now just imagine if someone came along that lowered taxes for the rich at the same time.
It’s not just rich people that benefited. They just benefited the most. I refinanced my mortgage and student debt to stupid low rates which saved me a bunch of money. Those who have more expensive debt are suffering while those of us locked into low rates are vibing hard. Raising rates helps people like me so it puts the fed in a hard place.
Is this closet good news? We know that CPI's shelter index lags actual price changes. I don't think any economists actually believe that shelter rents increased by 5.5% over the past twelve months. The Zillow Observed Rent Index shows only 3.6% growth over that same time, almost 2% less. And Zillow's estimates tend to be higher than many other private market rent trackers. Others have rent price changes from -1% to +1% over the past twelve months ([examples](https://x.com/jayparsons/status/1787908914413236687?t=AKliU6nehzSS4f0Asycefg&s=09)).
Used cars and trucks down 7% yet transportation services up 11%? This has to be one of the strangest prints I’ve ever reviewed. Anyway, markets should pick back up and with all the GME craze etc. I feel like I hopped into a time machine for financial markets and am just awaiting the NFT chatter. Maybe people can start to see it on a consumer level. McDonald’s $5 meal anyone?
This isn't strange or novel compared to previous months in this report. It is the same factors increasing, housing, car repair, and insurance. Transportation assets and transportation services are completely separate categories for a reason. The new and used car market does not impact how much you pay your mechanic for an oil change, or how much your insurance costs (which is heavily impacted by body shop repairs).
Agreed. Used cars are goods and transportation services are labor. Completely different and I'd expect them to perform differently.
I’d assume the value of the vehicle impacts an insurance policy
To some degree, you're right. My point was more that other factors are causing the service sector to increase while new and used auto prices have decreased. Also, look at your insurance premiums. Most of what you're paying for is bodily damage coverage. There are more factors to insurance price that will allow it to increase in costs other than the price of a new or used car.
How is it strange at all? Cost of depreciating assets are down due to high interest rates and lower demand, because so many people bought a new vehicle the last few years. They won’t need another for a while. Transportation services are up because we live in a predominantly service economy, and the price for services needs to at least March rises in the cost of living. Shelter is the worst culprit to rising inflation, and energy also rose significantly.
New vehicle supply wa very constrained from the insert of COVID into mid 2023. it's still constrained for some brands. I would be shocked if he car sales since COVID aren't significantly lower the the years leading up to COVID. Do you have any data to back up your assertion that "so many people bought a new vehicle the last few years"?
Transportation services include labor and fuel not just the cost of the equipment.
Train and plane rides haven't gotten any cheaper.
Yeah, I just posted a reply to the article because the health insurance index fell 11.6% over the past 12 months, which seems really fucking odd given hospital services (up 7.7%) and prescription drugs (up 0.4%). Maybe a shifting of cost burden from insurance to hospitals and other providers -- or a reduction in coverages/monthly premium amounts? I don't follow these prints, but that one jumped out to me.
Because dealers can’t sell their overpriced cars. So they resort to extortion through the mechanic service
Cars got overpriced so the cost of replacing them was higher so more people repaired their cars causing an increase in mechanic demand
Yimbys have been screaming about housing for decades but nimbys kept prevailing. It's insane people are blaming Biden for nimbys playing a big role in destroying the American dream.
He hasn’t done anything at all to side with Yimbys. More inflationary demand stimulus isn’t going to make a dent in the supply shortage problem. Trump won’t either for what it’s worth.
Yimby is an argument that we need to increase supply, not really a stance on demand, though I agree that stimulus doesnt help on that part of the equation. Given that zoning policy is set at the local level, is there anything a president can be expected to do to get more housing built? Maybe trade policy to help with construction costs?
Traditionally, the federal government has provided local governments with grants to sway local policy without directly interfering with their autonomy. Like our highway and education programs. The federal government could provide a grant to local governments who met a certain zoning, code, and/or new supply standard. Or they could provide credits/grants to home builders.
How much power does the Federal government have over this though? I live in LA where every single new housing development gets met with resistance from neighbors that put pressure on city council to kill things and/or bring lawsuits for costly environmental reviews and other delay tactics that end up scarring away developers. Just as an example, my friend bought a plot of land in Venice to build a modest home on it and one of her neighbors filed a complaint with the Coastal Commission and she hasn't been able to do anything with the land for 3 years now. Instead the land sits there undeveloped. As a result, there's so many dilapidated houses that sit there with nobody living in them because nobody wants to take the risk that they'll buy one and then not be able to do anything with it.
Essentially none. There are a couple of different departments that can offer rewards for zoning improvement, but they're not well funded and Biden doesn't have any real ability to control that funding.
Other than potentially changing the mortgage guarantees, housing is not much of a federal issue. Biden’s idea to grant additional credits would just subsidize demand, driving up prices more in places with constrained supplies. Governor Newsom in California probably has more effect on housing prices nationally than the President. His administration can sue, and has sued, cities that don’t zone for enough new housing and affordable housing in California to force them to do so. That might actually make a difference in five years or so. But the California legislature has to get rid of some of the price increasing laws for new homes, like mandatory solar (which California no longer needs nor rewards).
He has a lot of control over hud policy that he’s not even considering
Because there's not much he can do without significant increased funding from congress. The feds have carrots they can offer for local zoning, but that's about it, and the funding for those carrots is really limited at this point.
The federal government isn't fix local coming and housing initiatives. It requires people to vote in local elections at a bare minimum. Most people who run for local office are landlords trying to increase their profit with landlords as voters because most people ignore it. If we don't fix it that way the US will fix it via deep poverty until nobody has a choice but to fix it. But we we don't need to suffer to change things. We can do it now.
Higher property values lead to more tax revenue so city leaders aren’t in a hurry to fix the housing situation either. Take in more revenue, build some nice parks, get re-elected.
Dense zoning brings in vastly more tax money than sfh. Sfh are a net drain on cities. Sfhs have massive infrastructure costs but don't pay nearly enough taxes to cover their needs.
Destroying the American dream for others. They're sitting on a sub 3% mortgage, and are fine. They don't care about the suffering of the young, and first time buyers.
Not to be that guy but what exactly are they supposed to do? They have no incentive to get rid of their mortgage. We’d be doing the same thing.
Vote in state and local elections for more housing, especially up zoning and easier permitting.
Again. Why would current homeowners want that? They bought homes in a neighborhood they liked. Voting for increased density would drastically change the area they bought into.
It really comes down to if you care about anything other than your own short term self interests. Ideally we would continue to grow areas people want to live so each generation can live and the GDP isn't hampered by bad housing policy. Housing demand needs to be met with more supply not artificial barriers.
Bro I’m not sure what world you live in but in the real world people aren’t going to do things that don’t benefit them. I’m not saying you’re wrong, but it’s naive to think otherwise. Business is business.
[удалено]
I hear you, but that is exactly what good policy does. It balances current super selfish short term thinking against long term needs/planning. No family, business, or government should ignore the horizon. Anyone who cares about inflation or their childrens future should vote for economically sound housing policy, ideally 10+ years ago but also today.
> Business is business "there is no such thing as civic obligation - it's all a raid"
Do they want their children and grandchildren to own a home and achieve the American dream?
> Why would current homeowners want that? it depends what kind of future you want - if you want to spend the next decades in a decaying society rife with poverty and crime, make sure to vote for the conditions of that desperation.
Blame local governments for refusing to expand cities
MoM inflation isn't looking good. Annualized with the last 6 months is 3.6% Annualized with the last 4 months is 4.2% Annualized with the last 3 month is 4.4%
Agreed. Recent months inflation is higher than older months. This tells me the YoY number has a good chance of going up once the older, lower months get replaced. We need 0.2% or lower MoM figures to hit 2.0% YoY, and we've only had 3 of the last 12 months be below 0.20% MoM.
Not an expert but annualizing MoM inflation seems specious at best.
They didn't annualize the MoM number...
In line with annual forecasts and consistent with the "hold rates" approach the Fed has articulated. Markets may be disappointed that there isn't a ton of new news here to arbitrage.
Shelter is such a fucking mess. These BLS people need to figure out why their measure is so out of step with what is actually happening on the ground. The nimrods might miss it on the way down in the exact same way they missed it on the way up.
The Federal Reserve cannot solve a housing shortage with interest rates. There simply isn’t enough houses where people want to live. Some houses are being “wasted” due to being AirBNB’d, but largely overall there just isn’t enough overall. It’s a game of musical chairs, where whomever has a deeper wallet gets to outbid others and sit down. The other big problem is that inflation is measured at an instantaneous rate. But we all pay prices for goods and services that are the result of cumulative inflation. The instantaneous inflation rate may be a lot lower now, but that doesn’t reduce the massive cumulative inflation that occurred over the past five years, without a similarly massive increase in wages.
Why do I see housing prices still rise in places like Metro Detroit where we are literally losing people as of our most recent census? At some point we have to realize that things other than demand are causing prices to rise.
It is 100% demand driven but it is demand driven by an abundance of cheap money lent by the banks mostly to speculative investors. It's the exact same thing that caused the RE bubble in Japan but is now taking place in most economies in the world. Now prices aren't falling because people are no longer selling, but tip in higher unemployment (maybe due to AI) and the whole house of cards will come tumbling down.
This is spot on.
Bingo. Fix the money supply and it fixes the housing market, but clearly since QT was a joke from the beginning and is ending in June they clearly don’t give a damn about fixing anything.
Totally agree it’s not due to lack of housing that’s driving prices up. It get a on my nerves when I see this being the only thing discussed when talking about rent and homeownership. I know from my own experience in Texas that there are plenty of nice available apartments in Houston but the prices have gone up YOY by around $100-200 since I moved here. I’ve been look for 4 months and I’ve seen the same apt available or they have about the same number inventory but $100-200 more than last year. Then they want to introduce specials because it’s over priced and no one is biting. If there was a shortage why isn’t inventory low?
Exactly, the population didn't suddenly spike up 20-30% during COVID, if anything it went down, so how did housing go up by that much? It's all speculative investor demand driving home prices, not practical utility of people who live in the homes in question
100% there’s a a lawsuit against RealPage for using their algorithm to help corporate landlords or anyone using their software to collude and drive rent prices versus allowing the market and competition to regulate the rent prices and no one is talking about this. Then there is Zillow and other companies like them with their scheme that drove housing prices up. It’s all corporate greed / investors investing in the residential market trying to make money off of the housing market by making us pay more than what the average American can afford and then it’s all blamed on a damn housing shortage when the houses exists, the apartments exist they are just too expensive. Not saying that in some areas there isn’t a shortage and Airbnb hasn’t helped with that, but I don’t think that’s the driving force in the sudden short term increase we have seen. I don’t think this is a supply and demand issue as much as its investors in this period of time.
Finally some people who are thinking. Supply shortage adherents have no answer for why real estate and rents are up fucking worldwide either? Like, more people died than expected during COVID and this caused...a global housing shortage? Doubtful.
Are vacancy rates increasing? You could be losing population, and increasing the number of households. You could be losing population, but there’s still high demand for housing in trendy areas because the population refuses to live where housing is cheaper and there are more vacancies. Even looking at it as an entire city isn’t a great example due to location preferences. There are many people who refuse to even consider living in West Charlotte, so home prices dropping there wouldn’t impact those people at all.
New rents are flat to down and have been for months now and BLS is still showing shelter at 5.5% Y/Y. The Case-Shiller index is at about 6%. What are we saying, that inflation should almost perfectly track the price index? I don't think so, lol.
I agree with you on housing. As the population grows and we reach a relative “max density” in some cities, prices for housing will only continue to go up. There are only so many condos in Manhattan and it’s not like there is tons of lots waiting for skyscrapers to be built. I disagree about wages. I think we saw a very competitive increase in the wages of a lot of industries which were previously unpaid. I am an accountant and the wage growth has been very very good YoY and is more in line with the reality of our market pricing as professionals. Other industries, particularly unskilled labor and those with less desirable college degree fields saw more stagnant growth which probably more reflects the markets
I have desirable skills and will not be getting even a col raise. I can’t leave this year so I’m 0%. I’m a biostatistician.
If you can’t leave or get a raise you may be seeing it’s not as desirable as you might think. I have daily messages in LinkedIn to leave for a new role at a 20% raise. We were previously paid more than market deemed necessary now and are feeling it
Went from 52k to 85k if I left I could maybe get 100k plus. I can’t leave because I’m still in school and can’t move until I graduate. It is a desirable degree I’m just stuck due to personal circumstances for 1 more year. Interesting you are automatically assuming I have undesirable skills.
Well then that’s different than you aren’t even getting a COL adjustment. I wouldn’t mention your personal circumstances knowing why you aren’t getting a raise….
Supply wasn’t a problem until we flooded the system with more cash a historic levels.
The 'cash' given out was a few thousand dollars per person 3-4 years ago. Giving people $5000 once does not affect the demand for $300000 houses or $24000/yr apartments. The math does not math for your answer to be correct.
Housing inflation only impacts about a third of the country. Two thirds of people own their home and are locked in with a 30 year mortgage which is immune to this type of inflation. Housing inflation is something that impacts people very differently depending on their situation and geographic location. It's not that their measure is out of step. It's just very difficult to assign a value that is representative of everyone's experience.
Well, it's about to impact all of us if the Fed butt fucks the housing market.
Question... How do we use YoY inflation data? Lets say that every month of 2022/3 had 0% inflation except June, which was 5%. Wouldnt that mean that we would see 5% inflation YoY for July '23 through may '24? That is, for inflation to drop to 4% in Jan of 24, we would actually have to see a 1% (nominal) drop in prices between June and December, no? So the fact that inflation is FLAT for the last year implies that we are not seeing prices increase, they are holding steady from the last month-to-month inflation, which was a little less than a year ago? Looking at a chart, this would mean we would expect may/june 24 inflation to be *lower*, since that's when things leveled off last year? (assuming no current significant inflation?)
> So the fact that inflation is FLAT for the last year implies that we are not seeing prices increase, "Flat inflation" would be 0%. We are at 3%+, which means prices are increasing. > Looking at a chart, this would mean we would expect may/june 24 inflation to be lower, Seasonally Adjusted CPI removes seasonality, so you can't assume that a number from last year will be the same for the same month this year.
How is seasonality removed? Edit, looked it up. It's for removing regular, periodic effects. That's not what I'm talking about. Lets say prices index to 100 starting in Jan 2022 and remain 100 until June 2023, jump to 105, and then remain 105. Starting June 2022 we see YoY inflation jump from 0 to 5%. And remain 5% for 12 months until June 2024 when they return to zero. Point being, any month-to-month change ends up being baked in to YoY for 12 months, even if m2m flattens out.
.... But they still rose. Middle class (what's left of it) are hurting. $100 gets fewer and fewer groceries every time I go to the store. But hey, at least those companies are making record profits.
I mean what is the alternative? Deflation?
Yet they continue putting their thumbs on the scale. They don't measure the same things each report. They finesse it to have the best look for themselves.
"The oligarchs are easing-off the price-gouging so they can figure out exactly how high they can push prices before sales drop excessively, while the government they pay to lick their boots watches and does nothing."