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Home Prices Hit New Record High, Don’t Worry, It’s Not Inflation

The Case-Shiller national home price index hit a new high in February. That’s the latest data. Economists don’t count this as inflation.

Case-Shiller national and 10-city indexes via St. Louis Fed, OER, CPI, and Rent from the BLS

Chart Notes

  • National and 10-City Case-Shiller home prices hit new record highs in February
  • OER, CPI, and Rent are indexes measured by the Bureau of Labor Statistics (BLS).
  • OER stands for Owners’ Equivalent Rent. It’s the price one would pay to rent one’s own house unfurnished and without utilities.

Case-Shiller measures repeat sales of the same home over time and the indexes attempt to weed out major home improvements.

Case-Shiller is a far better measure of home prices than median or average prices which do not factor in the number of rooms, location, lot size, or amenities.

Not Inflation?!

Economists, including the Fed, consider homes a capital expense, not a consumer expense.

As a result, they all ignore economic bubbles and blatantly obvious inflation on grounds it’s not consumer inflation. This has gotten the Fed into trouble at least three times. The first was the dot-com bubble, then the Great Recession housing bubble and now.

It’s really pathetic when you make the same major mistake over and over and over. It’s a result of group think.

They all believe in the same silly models based on disproved theories including inflation expectations and the Phillips curve. You do not get in the good ole boys Fed club unless you think like a good ole boy.

Inflation Expectations

Fed Chair Jerome Powell mentions inflation expectations at every meeting. So did former Chairs Janet Yellen and Ben Bernanke.

In my post How Do Inflation Expectations Impact Wages and Future Consumer Inflation? I explain why inflation expectations are irrelevant to future inflation.

Moreover, two Fed studies agree.

…click on the above link to read the rest of the article…

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